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Posted by Karl Magdono on March 21, 2007, 2:06 pm
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I was an investor in a stock (Baan) that had a class-action
law suit against it. I received a distribution between $500
and $750. With my check, I received a letter that stated:
"The cash settlement fund has been invested in an interest
bearing account during the period of administration of the
claims while awaiting this distribution to members of the
class. The cash settlement fund has been treated as a
Qualified Settlement Fund for Federal income tax purposes,
and the income earned during the period of administration
has been subjected to Federal income tax. Internal Revenue
Service regulations provide that distributions to class
members from a Qualified Settlement Fund should be treated
by such class members-recipients as if they received the
payments directly from the defendants who paid the money
into the Qualified Settlement Fund. The Regulations further
provide that whether the distribution to the claimant is
includable in the claimant's gross income is generally
determined by reference to the claim in respect of which the
distribution is made. In the Baan Securities Litigation,
plaintiffs claimed that they were fraudulently induced to
purchase securities of Baan at artificially inflated prices.
Class members should consult with their tax advisors to
determine their tax consequences, if any, from this
distribution."
The letter doesn't say what amount of the check amount was
for interest that accumulated, what amount was due to the
basic settlement, etc.
Do you think I need to pay taxes on any of this? If so, how
(what form(s)/line(s) would I use)?
I am using H&R Block TaxCut for the first time, which seems
OK, but doesn't have any advice on qualified settlement
funds and the like.
Thank you for your help!
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