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The Financial Burden of Revenge Porn Litigation and the Plaintiff Double Tax
Taxation of settlements can leave as little as 10 cents on the dollars for the plaintiff. The Plaintiff Recovery Trust (PRT) reduces settlement taxation.
Revenge porn litigation, bad behavior, abysmal tax treatment, and possible zero net recovery.
Revenge porn is not rare. It's estimated that one in eight social media users in the US are revenge porn targets. Revenge porn victims (RPVs) can pursue various types of civil causes of action, including intentional infliction of emotional distress, invasion of privacy, and defamation. Some states have civil laws allowing RPVs to seek compensatory damages.
Other states have specific laws allowing for a private cause of action against the person sharing the private images. Revenge porn damages include reputational harm, emotional distress, pain and suffering, lost income, medical expenses (including mental health care) and punitive damages. Unfortunately, because of the plaintiff double tax, and RPV suffers twice: first by the underlying violative action itself, and second by how their litigation recovery is taxed.
The double tax applies to many types of non-business litigation cases, including those involving no physical injuries, such as defamation, emotional distress, and punitive damages. The entire award is taxable income in those cases, but the related attorney fee cannot be deducted on the victim's tax return. An RPV might consider a plaintiff recovery trust, a specially designed trust that exists to hold the litigation claim.
If there is a successful recovery, the plaintiff recovery trust will significantly increase the RPV after tax recovery, perhaps by 100% or more depending on the recovery amount and where the RPV resides.
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