Declaring Class Action Settlement?

Question

Five years ago I sold some shares of stock at a loss and summed that loss into my 1040 Schedule D capital gains for that year. In 2006 I received a settlement check for about $800 resulting from a class action suit against the company whose shares I'd held. Is it proper for me to show that settlement payment amount as a long term capital gain for 2006? If not, how should it be declared? Thanks,

Jeff

-- Jeffry Wisnia (W1BSV + Brass Rat '57 EE) The speed of light is 1.8*10^12 furlongs per fortnight.

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Benjamin Yazersky CPA · Accepted Answer

long term capital gain is correct___________________________________       ----->  real address on hobokeni or hobokenx

Seth Breidbart · Answer

Even if it was a short-term capital loss when sold?Seth

Benjamin Yazersky CPA · Answer

its a recovery of an item previously deducted on a prior year's tax return so the recovery takes on the same status if it was a short term capital gain or loss, then the recovery is a short term capital gain if it was a long term capital gain or loss, then the recovery is a long term capital gain ___________________________________

-----> real address on hobokeni or hobokenx

Declaring Class Action Settlement?

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