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Mark D
Mark D, Enrolled Agent
Category: Tax
Satisfied Customers: 1304
Experience:  MBA, EA, Specializing in Business and Individual Tax Returns and Issues
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I received a handwritten $1,667 check as part of a settlement.

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I received a handwritten $1,667 check as part of a settlement. I didn't get a receipt and I can't get in contact with the person in charge of the distribution. I really need the money now. Can I simply claim the $1,667 as additional income?
Customer

What type of settlement was this?

Regards,

Mark D
Customer: replied 7 years ago.
Thank you, Mark. Many years ago, a man was put in charge of property owned by my late grandfather and trees on this property were cut down for lumber and he didn't have permission to do this.
Customer

What type of property was this?

Regards,

Mark D
Customer: replied 7 years ago.
Real estate I believe. Some place in Kentucky.
Customer

Please let me rephrase the question. Was this commercial property or residential use? Also, is the property now yours (why did you get the check)? Thank you!

Regards,

Mark D
Customer: replied 7 years ago.
Sorry!

I don't know if it the property was commercial or residential, but I believe I and two cousins owned it jointly.
Customer

There is not enough information available to give you an exact answer. Conservatively, you could report the income on Line 21 of your Form 1040 (not subject to self-employment tax). However, this may simply need to be reported (when sold) as a decrease of basis in the land that was violated. I would tend to go towards the later as it would be easily justified that the removal of tress caused a decrease in value, for which you were compensated, thus reducing your basis in the property. Please let me know if you have further questions.

Regards,

Mark D
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Customer: replied 7 years ago.
Thank you, Mark. I'm sorry I couldn't be more forthcoming with certain answers.

I'm going to keep calling the distributor of the proceeds.

God bless!
Thank you!