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The money got returned by check. It was determined through arbitration (not judicial) that our company was actually not at fault and so all the money we paid in 2005 was repaid via a check back to our company to 2011.
No, this was not income. We had been going along on a construction job, getting monthly draws in 2005, when the owner felt we had purchased some materials that he did not authorize to be purchased with the funds he had given us already so he made us pay him for the materials. In 2011, through an internal arbitration process, it was determined our company was not at fault and these monies were returned to us as it was our money in the first place.
This was not insurance related.
The company still exists. My husband and I have an S corp; I am 51% owner and he is 49%.
Here was the process:
Our company received money from the owner to purchase materials and for labor. We purchased materials that he said we were not authorized to purchase with the money he had given us. At that point in 2005, we were made to pay him back the money $250K for those mateials. Then in 2011, it was finally determined that our company was not in the wrong for having purchased the materials and the $250K was paid back to us via a check to our company.