Money that's due to you as the result of a lawsuit. This money may be taxable. Examples of lawsuit proceeds that aren't taxable are amounts awarded to you for personal physical injury or sickness and an amount you get as compensation for damages to your property if the payment is less than the amount you paid for the property. Payments to compensate you for lost wages or punitive damages awards are examples of taxable court awards.
For more information, see IRS Pub 17, ch. 12.