BACKGROUND:
St. Paul Companies, Inc. was successfully sued in a class action case on the allegations that claimants were induced into buying their shares or exchanging Travelers Property Casualty Corp. shares for their shares based on false statements that inflated the share price. The settlement was calculated by determing the effect of the false statements on the share price [i.e., on the difference between the share price with and without the false statements]. Claimants' settlement amounts were based on the price difference times the number of shares they owned. The settlement has been determined to be a "Qualified Settlement Fund" per Treasury Reg. 1.468B. The settlement is being paid in July, 2007. QUESTION:
For Federal income tax purposes, how is this settlement to be treated by an individual investor who holds the shares as a Capital Asset?