Securities Litigation Check

[S T]

How do you or do you report an amount received in a Securities Litigation?
T/P received a check for $ 136.46 which was their pro-rata share of a Net Settlement Fund for Qwest in a Litigation Class Action.

Other Income?

Thanks

Sandy

[JohnH]

I've been reporting these types of settlements on line 21.

[jimfrombx]

I report it on Schedule D as long term gain with basis of ZERO. If the proceeds are for an IRA holding I generally (personal holdings) redeposit the check into the IRA and report nothing. However, I can't remember anyone ever telling me about a check received the prior year for IRA holdings

[S T]

Thank you,

Sandy

[Burke]

Those basically retain the same character of the monies which were originally related to it. Most will be on Line 21. Most people would not think to redeposit an IRA settlement back into the account to which the loss it is attributed. It would also be interesting to see how the custodian accounted for it. It probably shows up as a contribution on the 5498. There sure seem to be a bunch of them lately. I think it is all those attorneys advertising for class action lawsuits for every reason under the sun.

[JohnH]

I think many of these settlements are the result of "immunity" lawsuits.

[Burke]

Sorry, John, that one went over my head.

[JohnH]

It's something I ran across years ago, and now that I think of it I may be using the wrong word. I think the first one involved the airlines ( or phone companies). It begins when your legal dept determines you may have done something that exposes you to liability. . So a sympathetic law firm is persuaded to file a lawsuit and get it certified as a class action suit. After a lot of smoke and mirrors, a settlement is proposed which lines the pockets of the lawyers while doling out a pittance to the injured parties ( maybe even some sort of discount for future purchases in lieu of cash). As a result, the offending company is immunized against any future claims for the same issue.

[Burke]

Have you noticed that the fine print on your credit card agreement prevents this from happening?

[JohnH]

Can't say that I have, but I'm not surprised that it would. Are you talking about mandatory arbitration, or something else?

[Burke]

Yes, that is the default action. And that prevents any class action lawsuits as well.

[JohnH]

Oh, I'm confident the only reason they put that in there is to keep the cost of credit down.

[DaveO]

I got a check from one of the Fair Fund setlements that was for an account which was only ans IRA. When I endorsed and sent the check to the new custodian it showed up on the statement as a rollover amount. Otherwise, I usually report them on "D" if they no longer own the shares or a basis reduction if they do.

[JohnH]

Looks like I've handled a few of them incorrectly. But then I don't recall any of them being more than $150 or so.

[FEDUKE404]

Plan Z

Any votes for a cost basis adjustment ?

FWIW: I have never seen a "tax document" for such settlement distributions, which might clarify things.

FE