by Structured Settlement Watchdog
The acquisition of CBC Settlement Funding by an entity whose sole shareholder was the CEO of Sutton Park has not improved things
If one were to base it solely on the updated website for CBC Settlement Funding you would think these folks are dumber than a box of rocks. One thing is for certain, in my opinion, CBC Settlement Funding is not a credible or reliable source for structured settlement education.
CBC Settlement Funding can't even get the facts or tax basics right. CBC Settlement Funding continually demonstrates that it accepts and promotes mediocrity within and with its business partners. like Annuity.org, which continues to violate its own published standards, arguably to the detriment of structured settlement consumers.
Look at this nonsense from CBC Settlement Funding, appearing on a page with the title tag " Tax Implications of Structured Settlements Implications"
"According to the Periodic Payment Settlement Act, structured settlement payments are considered nonqualified, prohibiting the IRS from taxing any income. This means income from personal injury settlements are exempt from local, federal and state taxes. Any accrued interest from the settlement contract is also tax-free".
What is Wrong With CBC Settlement Funding?
- Periodic Payment Settlement Tax Act of 1982 (see below)
- The Periodic Payment Settlement Tax Act of 1982 does not prohibit the IRS from taxing any income.
- The word nonqualified does not appear in the Periodic Payment Settlement Tax Act of 1982, Public Law 97-473 (see below text).
- The word structured settlement does not appear in the Periodic Payment Settlement Tax Act of 1982
- The type of damages that the structured settlement payments represent governs the tax treatment [see IRC 104(a)(1), IRC 104(a)(2), IRC 130, IRC 5891 and IRC 139F]
- Of import to this discussion is CBC Settlement Funding referring solely to personal injury, showing that CBC has a complete disconnect between settlement and damages and fails to even know IRC 5891, the most relevant tax code section to their business. What a complete and utter embarrassment CBC Settlement Funding is to the structured settlement secondary market and in particular, the members of the National Association of Settlement Purchasers.
- According to IRC 5891((C)(1), The term “structured settlement” means an arrangement—
(A) which is established by—
(i) suit or agreement for the periodic payment of damages excludable from the gross income of the recipient under section 104(a)(2), or
(ii) agreement for the periodic payment of compensation under any workers’ compensation law excludable from the gross income of the recipient under section 104(a)(1), and
(B) under which the periodic payments are—
(i) of the character described in subparagraphs (A) and (B) of section 130(c)(2), and
(ii) payable by a person who is a party to the suit or agreement or to the workers’ compensation claim or by a person who has assumed the liability for such periodic payments under a qualified assignment in accordance with section 130.
- IRC 130 Qualified assignment. For purposes of this section, the term “qualified assignment” means any assignment of a liability to make periodic payments as damages (whether by suit or agreement), or as compensation under any workmen’s compensation act, on account of personal injury or sickness (in a case involving physical injury or physical sickness)
- CBC Settlement Funding fails to account for the fact that the law has been amended in the interim and the exclusion from income in its website redo.
- Note that IRC 139F dealing with damages for wrongful imprisonment, which are exclude from gross income however, not assignable under IRC 130 and must use a nonqualified assignment.
PUBLIC LAW 97-473—JAN. 14, 1983 96 STAT. 2605
Public Law 97-473
97th Congress
An Act
To amend the Internal Revenue Code of 1954 with respect to the tax treatment of Jan. 14,1983
periodic payments for damages received on account of personal injury or sickness,
and for other purposes. [H.R. 5470]
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled, Damages for
personal injury
SECTION 1. AMENDMENT OF 1954 CODE. or sickness, tax
treatment of
Whenever in title I or II an amendment or repeal is expressed in periodic
terms of an amendment to, or repeal of, a section or other provision, payments,
the reference shall be considered to be made to a section or other
provision of the Internal Revenue Code of 1954. 26 u s e 1 et seq.
TITLE I—INCOME TAX PROVISIONS
SEC. 101. TREATMENT OF RECIPIENT OF SETTLEMENT PERIODIC
PAYMENTS.
(a) TREATMENT OF RECIPIENT.—Paragraph (2) of section 104(a) 26 u s e 104.
(relating to compensation for injuries or sickness) is amended by
striking out "whether by suit or agreement" and inserting in lieu
thereof "whether by suit or agreement and whether as lump sums
or as periodic payments".
(b) TREATMENT OF ASSIGNEE-PAYOR.—
(1) I N GENERAL.—Part III of subchapter B of chapter 1 (relat-
ing to items specifically excluded from gross income) is amended
by redesignating section 130 as section 131 and by inserting 26 u s e 131.
after section 129 the following new section:
"SEC. 130. CERTAIN PERSONAL INJURY LIABILITY ASSIGNMENTS. 26 u s e 130.
"(a) I N GENERAL.—Any amount received for agreeing to a quali-
fied assignment shall not be included in gross income to the extent
that such amount does not exceed the aggregate cost of any qualified
funding assets.
"(b) TREATMENT OP QUAUFIED FUNDING ASSET.—In the case of any
qualified funding asset—
"(1) the basis of such asset shall be reduced by the amount
excluded from gross income under subsection (a) by reason of
the purchase of such asset, and
"(2) any gain recognized on a disposition of such asset shall be
treated as ordinary income.
"(c) QUAUFIED ASSIGNMENT.—For purposes of this section, the
term 'qualified assignment' means any assignment of a liability to
make periodic payments as damages (whether by suit or agreement)
on account of personal injury or sickness—
"(1) if the assignee assumes such liability from a person who
is a party to the suit or agreement, and
"(2) if—
96 STAT. 2606 PUBLIC LAW 97-473—JAN. 14, 1983
"(A) such periodic pa3aiients are fixed and determinable
as to amount and time of pa3mient,
"(B) such periodic payments cannot be accelerated,
deferred, increased, or decreased by the recipient of such
payments,
(C) the assignee does not provide to the recipient of such
payments rights against the assignee which are greater
than those of a general creditor,
"(D) the assignee's obligation on account of the personal
injuries or siclmess is no greater than the obligation of the
person who assigned the liability, and
"(E) such periodic payments are excludable from the
gross income of the recipient under section 104(aX2).
"(d) QUALIFIED FUNDING ASSET.—For purposes of this section, the
term 'qualified funding asset' means any annuity contract issued by
a company licensed to do business as an insurance company under
the laws of any State, or any obligation of the United States, if—
"(1) such annuity contract or obligation is used by the
assignee to fund periodic payments under any qualified
assignment,
"(2) the periods of the payments under the annuity contract
or obligation are reasonably related to the periodic payments
under the qualified assignment, and the amount of any such
payment under the contract or obligation does not exceed the
periodic payment to which it relates,
"(3) such annuity contract or obligation is designated by the
taxpayer (in such manner as the Secretary shall by regulations
prescribe) as being taken into account under this section with
resjpect to such qualified assignment, and
(4) such annuity contract or obligation is purchased by the
taxpayer not more than 60 days before the date of the qualified
assignment and not later than 60 days sifter the date of such
assignment."
(2) CONFORMING AMENDMENT.—The table of sections for part
III of subchapter B of chapter 1 is amended by striking out the
item relating to section 130 and inserting in lieu thereof the
following new items:
"Sec. 130. Certain personal injury liability assignments.
"Sec. 131. Cross references to other Acts.
26 use 130 note. (c) EFFECTIVE DATE.—The amendments made by this section shall
apply to taxable years ending after December 31,1982.
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