Arby’s is in Hot Water

June 15, 2012 — 1 Comment


Kenneth DeJoie sued Tulsa-based U.S. Beef Corp. dba Arby’s Restaurant, for the alarming incident in its Monument, Colo. outlet.

DeJoie claims that on May 28, 2010, he that he was relieving himself at a urinal in the men’s restroom when a jet of steam shot forth from the urinal to burn Mr. DeJoie’s genitals.

When he and his wife reported it, an Arby’s employee is said to have responded, saying ‘we have that bathroom problem again,’ and ‘this happens when the sink in the kitchen is running,'” the DeJoie’s say in the complaint.

The Dejoie’s argument is that the employee’s statement proves that the building’s plumbing and/or water heating systems routinely malfunction and violate building codes.

Among other claims Mr. DeJoie and his wife are seeking damages for loss of consortium. After all, damages for personal injuries like an auto accident, slip and fall or the just as totally normal steaming urinal case are tax-free if there’s physical injury. See IRS Issues New Rules For Tax-Free Legal Settlements.

Still, only recoveries for physical injuries or physical sickness qualify. If damages aren’t physical enough, they are taxed.  What if you suffer only emotional injuries? Some of it can seem like splitting hairs.

Compensation for physical symptoms caused by emotional distress are taxable. Yet neither the IRS nor Congress has clarified what’s physical and what’s not, even though Tax disputes such as this are common.

In 2010, the U.S. Tax Court overruled an IRS decision to tax a $350,000 settlement a man received after suing his ex-employer for intentional infliction of emotional distress. Helping to set some precedence for this particular case.

JDKatz, P.C. is a full-service law firm focused on tax law and estate planning.  We are dedicated to minimizing your existing liability and risks while providing valuable tax planning to streamline your tax issues in the future. Please call us at 301-913-2948 to schedule an appointment to meet with one of our trusted attorneys.


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