Are there tax consequences to the structured settlement or the assignment?
First of all, HR2884 made it clear that there are no tax consequences on the payments granted under the original structured settlement. This is based on the concept that a settlement for personal injuries simply returns, or attempts to return, through monetary relief, the injured party back to the position they were in before the injury. Since there is “no gain”, but rather just a return to “normal”, the transaction has no taxable basis. In addition, on June 10, 1999 the IRS issued Private Letter Ruling 119273-97, which confirmed that an individual’s sale of their structured settlement payments could not create a tax liability to that individual.
