The Motley Fool Discussion Boards

Previous Page

Financial Planning / Tax Strategies


Subject:  Global Crossing Settlement tax treatment Date:  6/21/2012  3:41 PM
Author:  Patzer Number:  116319 of 129499

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?

Copyright 1996-2019 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us