reporting settlement of class action suit against Country Wide

I received a couple of payments from the Countrywide class action suit in 2014. To date I have not received any formal tax document, like a 1099 MISC, from the litigators. Should I have received one at all? Do they report these amounts to the government, and if so, under what category?

Reply to
jo
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As to whether you have a taxable payment will depend upon why you received the payment and whether it relates to a payment you made and received a tax benefit.

E.g., one Bank of America settlement was a payment for over-charging on hazard insurance. This settlement payment if made for your personal home, would not be a taxable event. Another B of A settlement was for discrimination against clients who were black or hispanic. They were over-charged for mortgage fees and too high an interest rate. To the extent that any settlement payment from B of A was made for an expense that you deducted on your tax return and received a tax benefit, it would be taxable. E.g., if the settlement included monies for overcharging on points to take out a loan to acquire your home, and you deducted those points as an itemized deduction on your tax return and received a tax benefit, then the settlement payment would be a recovery and it would be taxable as Other Income on Line 21 of the Form 1040.

Reply to
Alan

I don't have much doubt that it is taxable because when I got rid of the underlying Countrywide security, I took a loss on it, so I did receive a tax benefit. I'm just curious why I don't get sent some official tax document like a 1099 misc to reflect payment of the funds and whether the IRS receives any equivalent notice about the payment. If neither of us get notifications, it would seem like an open invitation to just forget paying the taxes due (I'm too paranoid of the IRS to take this path) and if recipients aren't reminded at tax time, it's all too easy to forget that you got it, unless you are an OCD record keeper like myself.

Reply to
jo

... because the clip level for issuing the 1099-misc is $600. Your recovery must have been less. You mention the "underlying security". I will assume your recovery relates to the loss on a capital loss from which you benefited. Treat the recovery as a gain on the disposition of a capital asset.

Reply to
Alan

I've always treated these recoveries (much smaller amounts) as Sched D transactions with a 0 basis, as suggested several times on this forum.

Jo

Reply to
jo

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