After years of getting letters irregularly from legal entities pursuing a settlement from Global Crossing, yesterday I got a check in the mail for $15.10. The attached letter says that the Settlement Fund this comes from 'is as "Settlement Fund", as defined in Treas. Reg. Section 1.468B-1 through 5."Googling that reg, I find 1.468B-4 is the only part that seems relevant to me:Whether a distribution to a claimant is includible in the claimant's gross income is generally determined by reference to the claim in respect of which the distribution is made and as if the distribution were made directly by the transferor. For example, to the extent a distribution is in satisfaction of damages on account of personal injury or sickness, the distribution may be excludable from gross income under section 104(a)(2). Similarly, to the extent a distribution is in satisfaction of a claim for foregone taxable interest, the distribution is includible in the claimant's gross income under section 61(a)(4).What does this mean for me? The underlying claim was that the stock price was inflated, and the stock in question was held in a taxable account. I'd think this ought to be either short or long term capital gain, depending on how long I held the stock. (I don't remember; I'd have to dig through records.)How do I report this? Do I need to find a way to put it into long or short term capital gain on Schedule D, or am I okay just putting it as miscellaneous income on Line 21 of Form 1040? Or does it require some other treatment that I haven't considered?Patzer
It's a return of capital. If you still owned the stock (not possible in this case), you would adjust your cost basis. If you no longer own the stock (generically speaking), you report the recovery as a capital gain, long or short-term based on your holding period for the shares which generated this recovery.Ira
After years of getting letters irregularly from legal entities pursuing a settlement from Global Crossing, yesterday I got a check in the mail for $15.10All I got was a tax writeoff when they went bankrupt...But now you're making me wonder if I didn't get some letters or something - I think I did move after they went bankrupt. can't remember when the stock became truly worthless.I'm still annoyed at myself for not "selling" the few shares I had to the broker for $1 so that I could have claimed the loss in an earlier tax year.
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