In the I'm-mad-as-hell-and-I-won't-take-it-anymore category, more and more investors burned by stock market losses are joining class-action lawsuits against the companies.
But what if you get a settlement from such a suit? Is this money taxable?
The answer depends on why you got the money. If, for example, it was because you were overcharged for a stock -- because the price was artificially high because of accounting shenanigans (or worse), for example -- the payment is seen as a refund of part of that price. So, if you still own the securities, you should reduce your basis to reflect the payment, and there's no tax consequence until you later sell the stock.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
If you've already sold the shares, however, you're supposed to report the payment as a capital gain on Schedule D for the year you get the check.
But, if any part of the settlement was for punitive damages, that money is taxable as ordinary income.
And, if part of the payment represented interest earned on the settlement before it was paid out, that's interest income.
The settlement agent should be able to help you sort out things.
-
TJX Stock: Wall Street Stays Bullish After EarningsTJX stock is trading lower Wednesday despite the TJ Maxx owner's beat-and-raise quarter, but analysts aren't worried. Here's why.
-
Beware Three Medicare Open Enrollment ScamsCrooks are perfecting Medicare Open Enrollment scams to try to steal your money or personal information.
-
Tax Credit vs. Tax Deduction: What’s the Difference?Tax Breaks Your guide to tax deductions and credits, how the IRS treats them differently, and how they impact your tax bill.
-
Premium Tax Credit: Are You Eligible For This Health Insurance Tax Break?Tax Credits The tax credit can help qualifying individuals pay for coverage from the Affordable Care Act’s health insurance marketplace.
-
FSA Contribution Limits Are Higher for 2025FSA A flexible spending account allows you to build tax-free savings for certain medical expenses.
-
Florida Tax Deadline Extension: What You Need to KnowTax Relief The IRS extended federal tax return file time due to severe storms.
-
IRS: Here’s How to Recover Your Tax Records After a Natural DisasterTax Records Your tax documents can help you get federal relief faster, the IRS says.
-
Voters Approve New Veteran Property Tax ReliefTax Relief Thanks to the election, some Veterans will soon see expanded property tax exemptions.
-
Nevada Approves Diaper Tax Relief Amid Childcare CrisisTax Relief Nevada voters have expanded sales tax relief to diapers. But are prices still too high?
-
Earned Income Tax Credit (EITC) 2024: How Much Will You Get?Tax Credits The refundable amount for workers with or without children is slightly higher this year. Here’s what you need to know.
