How to Report Class Action Payments for Stocks

About once a month I receive an "invitation" to participate in a class action suit over some investment I own or had owned in the past. Because
it's so easy nowadays to do an online search of past purchase and sale transactions from the two brokerage firms I'm with I usually can't resist looking up the required data and sending in a claim.
About half of those claims pay off, some for only ten to twenty dollars, but a few have paid me much higher amounts. The remainder get me nothing, often because my share is less than ten dollars and is ineligible for payment per the terms of the suit.
When it comes to tax time I've been reporting those payments as long term capital gains because they are always received more than six months after I purchased the relevant investment.
Am I reporting them correctly?
Thanks folks,
Jeff
--
Jeffry Wisnia
(W1BSV + Brass Rat '57 EE)
  Click to see the full signature.
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload
On Tuesday, August 8, 2017 at 8:35:14 PM UTC-4, Jeff Wisnia wrote:

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
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
  Click to see the full signature.
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload
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:

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
  Click to see the full signature.
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload

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.
--
Barry Margolin
Arlington, MA
  Click to see the full signature.
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload
On Thursday, August 10, 2017 at 12:09:42 PM UTC-4, Barry Margolin wrote:

"...never still owned..." = "...once owned, but not now..."
Ira Smilovitz, EA
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
  Click to see the full signature.
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload
ira smilovitz wrote:

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
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload

BeanSmart.com is a site by and for consumers of financial services and advice. We are not affiliated with any of the banks, financial services or software manufacturers discussed here. All logos and trade names are the property of their respective owners.

Tax and financial advice you come across on this site is freely given by your peers and professionals on their own time and out of the kindness of their hearts. We can guarantee neither accuracy of such advice nor its applicability for your situation. Simply put, you are fully responsible for the results of using information from this site in real life situations.