I was an investor in a stock (Baan) that had a class-action law suit against it. I received a distribution between $500 and $750. With my check, I received a letter that stated: "The cash settlement fund has been invested in an interest bearing account during the period of administration of the claims while awaiting this distribution to members of the class. The cash settlement fund has been treated as a Qualified Settlement Fund for Federal income tax purposes, and the income earned during the period of administration has been subjected to Federal income tax. Internal Revenue Service regulations provide that distributions to class members from a Qualified Settlement Fund should be treated by such class members-recipients as if they received the payments directly from the defendants who paid the money into the Qualified Settlement Fund. The Regulations further provide that whether the distribution to the claimant is includable in the claimant's gross income is generally determined by reference to the claim in respect of which the distribution is made. In the Baan Securities Litigation, plaintiffs claimed that they were fraudulently induced to purchase securities of Baan at artificially inflated prices. Class members should consult with their tax advisors to determine their tax consequences, if any, from this distribution." The letter doesn't say what amount of the check amount was for interest that accumulated, what amount was due to the basic settlement, etc. Do you think I need to pay taxes on any of this? If so, how (what form(s)/line(s) would I use)? I am using H&R Block TaxCut for the first time, which seems OK, but doesn't have any advice on qualified settlement funds and the like. Thank you for your help!
- posted
17 years ago
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