This year we signed a contract with a deposit to purchase real estate. We then found out the owner sold the real estate to another person. We settled the suit through arbitration for which we received $430,000. We had $28,000 in legal expenses. We would like to know what our options are for reporting this income.
Thanks, Bill
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Report the entire amount of the settlement on line 21, Other Income, of Form 1040. Report the legal fees in the Miscellaneous section of Schedule A (and subtract 2% of AGI from the total of that section).
Shouldn't that be net of the returned deposit?
Yep, it sure should. Good catch.
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