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Posted by Stubby on December 23, 2006, 8:55 am
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I received some money from a class action settlement. It wasn't much
($36) but if if were much more I'd probably get a 1099. Just how is the
kind of money taxed? What line does it go on?
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Posted by Les on December 23, 2006, 9:33 am
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I got a 1099-misc last year for a situation like that. (I'm not a CPA)
>I received some money from a class action settlement. It wasn't much ($36)
>but if if were much more I'd probably get a 1099. Just how is the kind of
>money taxed? What line does it go on?
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Posted by R. C. White on December 23, 2006, 12:05 pm
Please log in for more thread options Hi, Stubby.
As I remind often, I am no longer licensed to practice as a CPA - and it's a
good thing. Most of what I knew, I've forgotten. And a lot of what I
remember is not true anymore. :^{
But the short answer to your question is to "ask your OWN CPA". This
question only SEEMS to be a simple one. The answer is buried in all those
legal documents that nobody reads except the lawyers who are getting the big
bucks to write and read them - and maybe the judge who approves them. If
you are lucky, there is a cover letter that tells you what you need to know
about WHY you got the settlement and how it might impact your tax return.
There are SO MANY reasons why the $36 might have been paid. Depending on
those reasons, your $36 might be completely taxable, or completely
non-taxable, or somewhere in between. It might reduce your basis for assets
(securities?) you hold. Or it might reduce your deduction you already
claimed for expenses, possibly in some prior year. It might reduce a
non-deductible expense, in which case you need not report it at all; it just
makes your non-deductible grocery bill, for example, a little smaller. Or
it might be for something entirely different. (Try researching "damages" in
a good tax reference and you might be there all day trying to navigate those
"twisty little passages".)
So there's no way that even an expert can tell you without seeing the
documents on which the settlement was based.
The practical answer, if you can't get an official one, is to include it in
your return as "other income"; the tax can't be much unless you are in such
a high bracket that it doesn't matter anyhow.
RC
--
R. C. White, CPA
San Marcos, TX
(Retired. No longer licensed to practice public accounting.)
rc@grandecom.net
Microsoft Windows MVP
(Currently running Vista Ultimate x64)
>I received some money from a class action settlement. It wasn't much ($36)
>but if if were much more I'd probably get a 1099. Just how is the kind of
>money taxed? What line does it go on?
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Posted by Stubby on December 23, 2006, 1:07 pm
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R. C. White wrote:
> The practical answer, if you can't get an official one, is to include it
> in your return as "other income"; the tax can't be much unless you are
> in such a high bracket that it doesn't matter anyhow.
No. The practical answer is the money goes straight into my pocket.
Actually I believe this is the right answer in any case. I believe
many shareholders were harmed by so action of the company in question.
The law suit just made each of us whole again. There was no deduction
taken for the harm and there is no tax for the money that sets it right.
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