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Tax Court rules sexual harassment settlement is taxable income

Fortune-Paladino v. Commissioner, T.C. Memo. 2025-101, No. 4975-23., 2025 BL 353634, 2025 Tax CT Memo Lexis 106, Court Opinion

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Tax Coda
Oct 21, 2025
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On October 2, 2025, the U.S. Tax Court held in Fortune-Paladino v. Commissioner that Cerissa Rene Fortune-Paladino's $135,000 settlement from her former employer was taxable income.

The court found that the payment compensated her for emotional distress and humiliation rather than physical injuries, meaning it was not excludable under Internal Revenue C…

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