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Last year I sued my former "friendly" stockbroker for malpractice (churning, unsuitable investments, the works) and received a settlement from the firm (out of court -- we never went to arbitration). No taxes were withheld. I now received a form 1099-MISC with the settlement reported in box 3 ("Other Income"). I called IRS and they said the settlement was punitive damages and it is taxable.

Does anyone have anything to say about this? After getting cheated by the broker, do I now have to share the reparations with Uncle Sammy? Is life just not fair?

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