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Treatment of a stock settlement

I own shares of a publicly traded company, some of them are in an IRA, and some are in a conventional account. I have owned these shares for several years. A lawsuit against this company, for material misrepresentation of the value of the company, was settled. I just received a few hundred dollars split into two checks (one for each of the two accounts). Anyone care to venture an opinion on how to treat this income? I still own these shares. I'm guessing that I should declare the check for the IRA shares as ordinary ("other") income. How do I treat the check for the non-IRA shares? It's kind of galling to have to treat it as ordinary income when the shares on which it's based have a considerable unrealized capital loss.

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Reply to
NoSuchPerson
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Then it's also a withdrawal from the IRA; I'd guess you should deposit it into the IRA.

I'd consider it an adjustment to basis.

Seth

Reply to
Seth Breidbart

A technical correction here becomes important as the story unfolds. YOU own one set of shares, the ones in the conventional account. Your IRA, a separate legal entity from you, owns the other set.

One check should have been payable to you, the other to the IRA. The check attibutable to the IRA shares belongs in the IRA. Check with your IRA custodian to see whether they can process the check as is or whether you need to get it reissued.

-- Phil Marti Clarksburg, MD

Reply to
Phil Marti

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