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I will be receiving my deposit back through a lawsuit and I

wish to know, do I...
I will be receiving my deposit back through a lawsuit and I wish to know, do I have the clam this as income on my taxes?
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Answered in 6 minutes by:
8/27/2013
jgordosea
jgordosea, Enrolled Agent
Category: Tax
Satisfied Customers: 3,161
Experience: I've prepared all types of taxes since 1987.
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Hello and greetings,

 

From what you wrote you will just be getting back something that you had paid with after tax dollars.

Presumably that deposit amount was not taken in the past as a deduction from income.

 

Since this is only to restore your wealth (and was not deducted) then it is not included in income for tax purposes. Income is an increase in wealth that is realized.

 

If you also get something else than what you paid in, such as attorney fees or punitive damages, then those amounts generally would be deemed to be income.

 

Please ask if you need more discussion or information.

Thank you.

 

 

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Customer reply replied 4 years ago


I am on permanent disability at 52 so does that apply regarding receipt of more capital from settlement?

Hello again,

 

It seems you may be speaking of a stock or other investment.

 

If you have already sold the stock, or investment, then the additional money is income, yes.

 

This would be capital gain income and is reported on your return if you are required to file; but there is this year a zero tax rate, no tax, on long term gain (held more than one year) when you are in the 10 or 15% tax rate (for lower incomes).

For 2013 rates see http://www.forbes.com/sites/kellyphillipserb/2013/01/15/irs-announces-2013-tax-rates-standard-deduction-amounts-and-more/

 

If you still own the stock, or investment, you may be able to add the amount received now to the cost that you will use when you do sell.

 

Hope that clarifies for you but please continue to ask if you need more help.

Thank you.

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Customer reply replied 4 years ago


IT IS NOT STOCK OR ANY INVESTMENT. THE MORTG COMP HAS PERFORMED NEGLIGENCE AND I AM WAITING IF PUNITIVE DAMAGES WILL BE ADDED TO MY INITIAL DEPOSIT. THAT IS ALL.

Great, then as we said the deposit is not income it is a return of payment.

Punitive damages will be income.

 

If you need more help, just ask (but I have to leave for a while, thanks).

 

jgordosea
jgordosea, Enrolled Agent
Category: Tax
Satisfied Customers: 3,161
Experience: I've prepared all types of taxes since 1987.
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