Joe Morris wrote:

- quote -

First, it is not reported on Schedule D as long as you have
sufficient cost basis to absorb the payout. Just adjust your
basis in the stock, so that when you do sell some of the
shares you calculate the gain/loss correctly.

- quote -

If you have already sold the stock, report the payout as
gross proceeds for a sale, cost basis zero, with a net gain
equal to the payout.

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

This is probably documented somewhere that I'm overlooking
but if so I'm not able to find it...

Situation: taxpayer holds stock in ABC Corporation. Another
party initiates a class-action lawsuit against ABC for being
nasty to its stockholders and ABC agrees to settle, with
some amount of money being distributed ($xx per share) to
anyone who held its common stock during the period of
nastyness. (This seems to be an increasingly common
situation, sad to say...)

The payment is apparently to be treated as a return of
capital (to the extent of the taxpayer's basis in ABC
stock), and as a capital gain after the basis is exhausted.

Here's the question: how is the payment reported on Schedule
D? In particular, is it reported as if it were a sale with
the sale date the date of the payment, or does the IRS
expect additional information?

And same situation except that taxpayer has previously sold
the stock but still participates in the recovery. Does this
affect the way the payment is to be reported? And is there
any significance if the sale of the ABC shares (perhaps
years ago in a closed tax year) was at a loss?

Joe Morris

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >