I received a settlement in 2006 for structural defects in a home I purchased a few years ago. I did not have any work done yet and did receive a 1099 misc form from the lawyer. The 15k is listed under "other income". It is showing up on line 21 of the 1040 as "prizes/awards". Is this taxable, even tho I do plan to have the work done?
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You'd have to show a tax lawyer both the complaint and the settlement agreement or judgment. But it could well be that the settlement you received represented the diminished value of the home. In that case it should not be taxable, but would reduce your basis in the property. Stu
"setagw" wrote
That amount should be to compensate you for damages to your house, as such you should be reducing your cost basis in the property. Later, when the repairs are made, you increase your basis.
-- Paul Thomas, CPA snipped-for-privacy@bellsouth.net
Would that be considered a reduction in basis (non-taxable)?
When you have the work done, it will add to the basis.
Seth
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