How to report this income?

In the past ten days I have received three unexpected settlement payment checks for things I hadn't received any earlier notices about.

The first was a check for FOUR CENTS attributed to some sort of Ebay infraction. I wonder how much money the lawers made for getting my compensation and mailing me that check? No worries here, I'm not cashing that check, it went into my "S&G" file.

The second was for a Bank of America "Fair Fund" settlement and as far as I can tell it related to some B of A investment I must have held 10 to 12 years ago.

The third was from a brokerage firm I was using a few years ago, before the broker I'd been with retired and I moved the account to another firm. The note accompanying it said it was compensation for commission fees I was charged which were in excess of FINRA allowed amounts.

I'm thinking the second and third checks could be reported as capital gains with a zero basis and a sales price equal to the check amounts, since they compensated me for lower gapital gains (or increased capital losses) reported for the years when I sold the investments.

Am I close to the mark, and if not, how should I report that income.

Thanks guys,

Jeff

Reply to
jeff_wisnia
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You can deposit the check and ignore tax reporting of it. However, if the amount was for something like excessive fees, and you used EBay for personal uses, you thus did not deduct the fees, and so you don't have to report the recovery. If you used EBay for business, the fees would have been deducted on your Schedule C or 1120, and you must thus add the amount to your income. But it's so small, don't bother.

Need to know details about the settlement. It might not be taxable at all, or it might be ordinary income, or it might be long term capital gain as you suggested.

This makes sense. However if your account was a regular IRA then I'd say the settlement is ordinary income.

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