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Subject Author Date
Money received in a lawsuit Bill 12-25-2006
Posted by Bill on December 25, 2006, 10:08 pm
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 This year we signed a contract with a deposit to purchase
real estate. We then found out the owner sold the real estate
to another person. We settled the suit through arbitration for
which we received $430,000. We had $28,000 in legal expenses.
We would like to know what our options are for reporting this
income.

Thanks,
Bill

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Posted by Bill Brown on December 26, 2006, 5:31 am
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 Bill wrote:

> We would like to know what our options are for reporting this
> income.

Report the entire amount of the settlement on line 21, Other
Income, of Form 1040. Report the legal fees in the
Miscellaneous section of Schedule A (and subtract 2% of AGI
from the total of that section).

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

Posted by Mike20878 on December 28, 2006, 12:26 am
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> Bill wrote:

>> We would like to know what our options are for reporting this
>> income.

> Report the entire amount of the settlement on line 21,
> Other Income, of Form 1040. Report the legal fees in the
> Miscellaneous section of Schedule A (and subtract 2% of AGI
> from the total of that section).

Shouldn't that be net of the returned deposit?

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

Posted by Bill Brown on December 28, 2006, 8:54 pm
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Mike20878 wrote:

> Shouldn't that be net of the returned deposit?

Yep, it sure should. Good catch.

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

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