How to Report Class Action Payments for Stocks

Perhaps. Technically, any proceeds are a return of capital. If you still own the stock, you decrease your cost basis by the amount received. If you've sold the stock, you report the proceeds as either a short-term or long-term capital gain, depending on how long it's been since you purchased the stock. Note that long-term capital gains require more than one year of ownership, not six months.

Ira Smilovitz, EA

Thanks Ira. It looks like I guessed right with the long term capital gain choice. I've never still owned the relevant stock in any class action suit I've entered into and it's always been at least a year before I receive any payments, sometimes as much as three or four years after I respond to and become a participant in a class action suit.

Jeff

ira smilovitz wrote:

If you never owned the stock, how can it be a capital gain? A capital gain is the profit you make from selling something for more than you paid for it. If you never bought it you never sold it, so you don't have a gain.

"...never still owned..." = "...once owned, but not now..."

Ira Smilovitz, EA

Right you are Ira. I don't think I would have gotten unsolicited information about a class action suit mailed to me unless I'd owned (or maybe still own) the stock in question.

Jeff