Final answer:
The statement that punitive damages are fully taxable to the recipient is true. The IRS considers punitive damages as income, and they must be reported and fully taxed.
Step-by-step explanation:
True/False: Punitive damages are fully taxable to the recipient. This statement is true. Punitive damages are awarded to a plaintiff beyond the compensatory damages. These are intended to punish the defendant for egregiously wrongful acts and to deter similar conduct in the future. According to the Internal Revenue Service (IRS) regulations, punitive damages are considered income and are therefore subject to taxation. The recipient must report them as ‘Other Income’ on their tax return, and they are fully taxable without any deductions or exemptions.