BofA Fair Fund Admin?

[RayT]

Client received a "distribution payment" of $160.00 from Bank of America Fair Fund Administrator, with an attached letter. The letter stated the fund was established by the SEC in connection with certain administrative proceedings. The letter is not a substitute Form 1099. It does not provide a FEI number. Is this distribution reportable as a distribution of dividends? Comments welcome.

[AJsTax]

The ones I have seen from some of the brokerage houses for the same reason state that if you still own the securities that you bought or owned when they did the deed that they have to pay for now (was mostly 99 - 02 , I think), then you reduce the basis of those securities by the amount received , with some reservations for interest earned and managment fees. If the items have already been liguidated then all is taxable income.

[erchess]

a question of character

If it is taxable income what is the character of the income? Ordinary? Capital Gain? surely not dividend or is it?

[Jesse]

Is there a web address in the letter?

I had one for Janus which the letter broke down the amount of the check issued into two amounts. The Management advisory fee component was line 21 and the remainder, as AJ said reduces the basis of those securities and if the items have already been liguidated then all is taxable income. In my case the funds were not liquidated and I made a note to reduce basis. If they had liquidated I would think it to be capital gains.

[AJsTax]

Jesse

is right. One of the ones I did also had some interest income that was reported on schedule B. That one was split three ways; part to interest income, part to other income and part to capital gains with 0 basis. It was all laid out on the web page. But I had to take the time to look it up for a lousy $800 in income. and hard to charge much extra for. But that is the service part of this business.

[JohnH]

Here's one hit I got on a web search.

http://www.bankofamericafairfund.com/

They appear to tie themselves in knots trying to avoid actually giving any useful advice, but my general impression would be that the settlement funds would retain the same character as the original investment. If non-qualified money, then it would be capital gain. If qualified money, it would have the character of a retirement plan distribution (subject to the penalty if under 59-1/2), Of course, before calcualting the penalty on a large amount I'd want to do a little more research. But if this is like most class-action settlements, no individual gets much money because the lion's share goes to the lawyers & the government, and then they toss the injured parties a little bone to give it a veneer of fairness.