Your client, Teddy Chow, and his wife Abby filed a lawsuit to recover damages for personal injuries Teddy sustained in an auto accident in 2000. In 2004, a jury awarded Teddy $ 1.62 million in damages. In addition, delay damages in the amount of $ 1.08 million were then added to that award, resulting in a total judgment of $ 2.7 million. The defendants appealed the award, and while the appeal was pending, the parties reached a settlement, which provided for payment to Teddy of $ 2.55 million. In 2009, after attorney fees of $ 850,000 were subtracted, Teddy received $ 1.7 million. Teddy wants to know how these amounts are treated for tax purposes. After appropriate research, write a letter to Teddy and Abby explaining your findings. Their address is 654 Hops Street, Golden, CO 78501.
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