Litigation

The above question was posed by someone in an internet search earlier today and the answer is that while the payments from a structured settlement viewed as income, such income is exempt from income taxes.

A definition of income is found at Section 61(a) of the United States Internal Revenue Code which reads " Except as otherwise provided in this subtitle, gross income means all income from whatever source derived" 

Structured settlements are primarily used to pay damages for personal physical injury or physical sickness, or claims pursuant workers compensation statute.  IRC 104(a)(1) and IRC 104(a)(2) provide exemptions for income paid that possesses such characteristics.

More information about the taxation of structured settlements  here