Treatment of a stock settlement


R

rlsusenet

I own shares of a publicly traded company, some of them are
in an IRA, and some are in a conventional account. I have
owned these shares for several years.

A lawsuit against this company, for material
misrepresentation of the value of the company, was settled.
I just received a few hundred dollars split into two checks
(one for each of the two accounts).

Anyone care to venture an opinion on how to treat this
income? I still own these shares.

I'm guessing that I should declare the check for the IRA
shares as ordinary ("other") income.

How do I treat the check for the non-IRA shares? It's kind
of galling to have to treat it as ordinary income when the
shares on which it's based have a considerable unrealized
capital loss.
 
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S

Seth Breidbart

I own shares of a publicly traded company, some of them are
in an IRA, and some are in a conventional account. I have
owned these shares for several years.

A lawsuit against this company, for material
misrepresentation of the value of the company, was settled.
I just received a few hundred dollars split into two checks
(one for each of the two accounts).

Anyone care to venture an opinion on how to treat this
income? I still own these shares.

I'm guessing that I should declare the check for the IRA
shares as ordinary ("other") income.
Then it's also a withdrawal from the IRA; I'd guess you
should deposit it into the IRA.
How do I treat the check for the non-IRA shares? It's kind
of galling to have to treat it as ordinary income when the
shares on which it's based have a considerable unrealized
capital loss.
I'd consider it an adjustment to basis.

Seth
 
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P

Phil Marti

rlsusenet@NOSPAMPUHLEEZschnapp.org said:
I own shares of a publicly traded company, some of them are
in an IRA, and some are in a conventional account. I have
owned these shares for several years.
A technical correction here becomes important as the story
unfolds. YOU own one set of shares, the ones in the
conventional account. Your IRA, a separate legal entity
from you, owns the other set.
A lawsuit against this company, for material
misrepresentation of the value of the company, was settled.
I just received a few hundred dollars split into two checks
(one for each of the two accounts).

Anyone care to venture an opinion on how to treat this
income? I still own these shares.
One check should have been payable to you, the other to the
IRA. The check attibutable to the IRA shares belongs in the
IRA.

Check with your IRA custodian to see whether they can
process the check as is or whether you need to get it
reissued.
 
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