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From: jaygreg on 13 Apr 2010 14:01

I’ve held a stock for many years and enjoy its dividends now as part
of my retirement income. Last year, I received a small check (less
than $150) for settlement in a class action suit against the firm.
Gathering the paperwork, making the necessary copies, and filing out
the forms was more expensive than the award!

I apparently just deposited the check and assigned it to the category
of “Capital Gains LT”. It flowed to my Tax Schedule report and the
only entry under Schedule D.

When TurboTax (TT) got a hold of the file, it wanted details about the
boxes of the paperwork accompanying the amount. There was no such
form; I merely received a check from a law firm of whatever agency
they had process the payments. I made the assignment at the time not
knowing how to handle it and probably thinking I’d figure it out
before I had to reconcile TT. I did; I deleted the TT entry! I really
don’t know what this entry should be. Can someone please give me a
clue?
From: Zaidy036 on 13 Apr 2010 19:56
In article <eab893cd-67ca-4677-b916-581353850a56(a)d33g2000vbu.googlegroups.com>,
jaygreg90(a)hotmail.com says...
>
> I?ve held a stock for many years and enjoy its dividends now as part
> of my retirement income. Last year, I received a small check (less
> than $150) for settlement in a class action suit against the firm.
> Gathering the paperwork, making the necessary copies, and filing out
> the forms was more expensive than the award!
>
> I apparently just deposited the check and assigned it to the category
> of ?Capital Gains LT?. It flowed to my Tax Schedule report and the
> only entry under Schedule D.
>
> When TurboTax (TT) got a hold of the file, it wanted details about the
> boxes of the paperwork accompanying the amount. There was no such
> form; I merely received a check from a law firm of whatever agency
> they had process the payments. I made the assignment at the time not
> knowing how to handle it and probably thinking I?d figure it out
> before I had to reconcile TT. I did; I deleted the TT entry! I really
> don?t know what this entry should be. Can someone please give me a
> clue?

Return of Capital so the Cap Gain will be increased when you finally sell.

If you use average cost this will work OK. If you specify shares for sales then
the return of cap should be against specific shares.
From: jaygreg on 13 Apr 2010 20:23
On Apr 13, 7:56 pm, Zaidy036 <Zaidy036NOS...(a)optonline.net> wrote:
> In article <eab893cd-67ca-4677-b916-581353850...(a)d33g2000vbu.googlegroups..com>,
> jaygre...(a)hotmail.com says...
>
>
>
>
>
> > I?ve held a stock for many years and enjoy its dividends now as part
> > of my retirement income. Last year, I received a small check (less
> > than $150) for settlement in a class action suit against the firm.
> > Gathering the paperwork, making the necessary copies, and filing out
> > the forms was more expensive than the award!
>
> > I apparently just deposited the check and assigned it to the category
> > of ?Capital Gains LT?. It flowed to my Tax Schedule report and the
> > only entry under Schedule D.
>
> > When TurboTax (TT) got a hold of the file, it wanted details about the
> > boxes of the paperwork accompanying the amount. There was no such
> > form; I merely received a check from a law firm of whatever agency
> > they had process the payments. I made the assignment at the time not
> > knowing how to handle it and probably thinking I?d figure it out
> > before I had to reconcile TT. I did; I deleted the TT entry! I really
> > don?t know what this entry should be. Can someone please give me a
> > clue?
>
> Return of Capital so the Cap Gain will be increased when you finally sell..
>
> If you use average cost this will work OK. If you specify shares for sales then
> the return of cap should be against specific shares.

Thanks, Zaidy.
From: jaygreg on 13 Apr 2010 20:34
On Apr 13, 8:23 pm, jaygreg <jaygre...(a)hotmail.com> wrote:
> On Apr 13, 7:56 pm, Zaidy036 <Zaidy036NOS...(a)optonline.net> wrote:
>
>
>
> > In article <eab893cd-67ca-4677-b916-581353850...(a)d33g2000vbu.googlegroups.com>,
> > jaygre...(a)hotmail.com says...
>
> > > I?ve held a stock for many years and enjoy its dividends now as part
> > > of my retirement income. Last year, I received a small check (less
> > > than $150) for settlement in a class action suit against the firm.
> > > Gathering the paperwork, making the necessary copies, and filing out
> > > the forms was more expensive than the award!
>
> > > I apparently just deposited the check and assigned it to the category
> > > of ?Capital Gains LT?. It flowed to my Tax Schedule report and the
> > > only entry under Schedule D.
>
> > > When TurboTax (TT) got a hold of the file, it wanted details about the
> > > boxes of the paperwork accompanying the amount. There was no such
> > > form; I merely received a check from a law firm of whatever agency
> > > they had process the payments. I made the assignment at the time not
> > > knowing how to handle it and probably thinking I?d figure it out
> > > before I had to reconcile TT. I did; I deleted the TT entry! I really
> > > don?t know what this entry should be. Can someone please give me a
> > > clue?
>
> > Return of Capital so the Cap Gain will be increased when you finally sell.
>
> > If you use average cost this will work OK. If you specify shares for sales then
> > the return of cap should be against specific shares.
>
> Thanks, Zaidy.

Whoops! Spoke too soon. My list of tax lines on Q2008 H&B doesn't have
a Return of Capital or anything that looks close to me (but I'm not an
accountant). Could you - or anyone else with this version - suggest an
selection please.
From: R. C. White on 13 Apr 2010 23:11
Hi, Jaygreg.

Sad to say, you can't properly classify that $150 receipt until you sift
through those "boxes of the paperwork" to find out WHY somebody sent you the
check. :>(

You said it was "for settlement in a class action suit against the firm."
But who is "the firm"? The company whose stock you held? Or the
stockbroker? Or some law firm? Or somebody else?

> a check from a law firm of whatever agency
> they had process the payments

That law firm SHOULD have specified the ultimate source of the payment - and
the reason for it. That information is probably in those boxes, but it
SHOULD have been clearly summarized on top of the pile.

To properly classify the $150, you need to know the claim stated in the
lawsuit AND the court's finding, saying WHO must pay you and WHY - the legal
justification for the payment.

If you mention the name of the company and/or the title of the case, perhaps
someone here will recognize it or may be able to look it up. Otherwise, you
might have to ask the law firm that sent you the check.

If you can't get a good answer, my suggestion would be to apply the $150 to
reduce your basis in that stock. In other words, if the stock cost you
$10,000, reduce your cost to $9,850. Then, when you sell the stock - some
day - your gain will be $150 more (or your loss will be less) and you will
settle up with the IRS at that point, as Zaidy said

A Return of Capital need not be reported in the year that it is received
unless that is also the year of sale OR the amount received exceeds your
basis in the stock. If, for example, that stock had cost you only $125,
then the $150 Return of Capital would produce a $25 taxable gain.

Too often, especially in class-action lawsuits with thousands of parties and
usually tiny settlement checks, the effort involved in determining the
proper tax treatment far exceeds the amounts involved.

Since I've been retired for nearly 20 years and tax rules change daily,
please be sure to check with your own CPA or tax attorney to be sure that my
suggestion is proper in your case.

RC
--
R. C. White, CPA
San Marcos, TX
(Retired. No longer licensed to practice public accounting.)
rc(a)grandecom.net
Microsoft Windows MVP
(Using Quicken Deluxe 2010 and Windows Live Mail in Win7 x64)

"jaygreg" <jaygreg90(a)hotmail.com> wrote in message
news:eab893cd-67ca-4677-b916-581353850a56(a)d33g2000vbu.googlegroups.com...
>
> I�ve held a stock for many years and enjoy its dividends now as part
> of my retirement income. Last year, I received a small check (less
> than $150) for settlement in a class action suit against the firm.
> Gathering the paperwork, making the necessary copies, and filing out
> the forms was more expensive than the award!
>
> I apparently just deposited the check and assigned it to the category
> of �Capital Gains LT�. It flowed to my Tax Schedule report and the
> only entry under Schedule D.
>
> When TurboTax (TT) got a hold of the file, it wanted details about the
> boxes of the paperwork accompanying the amount. There was no such
> form; I merely received a check from a law firm of whatever agency
> they had process the payments. I made the assignment at the time not
> knowing how to handle it and probably thinking I�d figure it out
> before I had to reconcile TT. I did; I deleted the TT entry! I really
> don�t know what this entry should be. Can someone please give me a
> clue?

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