Ted <Ted666[at]yahoo.com> wrote:
- quote -

Seems right to me. But you have a lawyer who, if he doesn't
understand the tax aspects, could ask someone who does.

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

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"Arthur Kamlet" <kamlet[at]panix.com> wrote:
- quote -

Both. Since I am still a significant stockholder, what they
have to do is important.

- quote -

They misappropriated money. My lawyer says I have to chose
between them paying my loss to me directly, or having them
pay the entire loss back to the company; since the Judge
found for me on both, but I can only get one. I am trying to
figure out which is better. Perhaps they are ultimately the
same.

- quote -

So, if the award was $100k, my basis $250k, and I later sold
the stock a few years later for $500,000, I would have a
capital gain of $350k. Is that right?

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Ted wrote:

- quote -

The applicable tax statute is not so broad as to include all
"illegality." If no criminal statute involved, it's a
matter of whether the payments were ordinary and necessary
business expenses. The facts which led to the court's
conclusion and the corporation law cited may or may not be
relevant to the deductibility.

Fred F.

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Ted wrote:

- quote -

This may (or may not) be helpful:

http://www.irstaxtrouble.com/2006/10...ay-not-be.html

Gary

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Ted <Ted666[at]yahoo.com> wrote:

- quote -

I can't tell if you are more interested in what you have to
do or what they have to do?

I still do not quite understand what your losses were that
you had to sue to recover.

But the general rule is unless the settlement is to
compensate you for your personal physical injury or disease
and you name is not Murphy, then the settlement is taxable.o

However, if your automobile was damaged and you sue to
recover actual provable losses, that would not be taxable
either.

If you bought stock in this compoany and later sold it for
less than you could have due to actions for which you were
awarded damages, you would report the income on Schedule D,
short term or long term, depending on the original sale.
If you still held the stock, this award would decrease your
basis but not below zero. Income in excess of basis is short
or long term gain.

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

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"Ted" <Ted666[at]yahoo.com> wrote:

- quote -

The part that pays you back for your principal investment
(funds you already paid taxes on) is not taxable. Anything
in excess of that might be capital gain, or might be
ordinary income, depending on the exact nature of your
losses and the exact wording if the court's order.

Stu

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"Ted" <Ted666[at]yahoo.com> wrote

- quote -

Yes, it is going to be taxable.

- quote -

Taxable. But the amount may be partly a return of your
investment, so maybe not all of it, depending on if you still
hold stock, and if not, how you recorded the event.

- quote -

Unless it's an "S" corporation, how they handle it isn't of
concern to you.

If it is an "S" corp, and you still own stock, you would have
several things happening, so consult the corporate attorney
AND your own attorney or tax advisor (CPA or EA) on the topic.

--
Paul A. Thomas, CPA
Athens, Georgia

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I just won a lawsuit against the directors of a small
company in which I own stock; they have to pay me my share
of funds they misappropriated from the company.

Since I am just receiving reimbursement for damages, I don't
think it is a taxable event. However, if they hadn't
misappropriated the funds my investment would be worth more,
which would ultimately be taxed as capital gains; so perhaps
it is taxable. I am confused. Taxable to me or not?

The company originally deducted the improper payments to the
directors. Does the company have to refile to backout the
deductions (since they are illegal, they obviously weren't
deductable); or is a lawsuit verdict not relevant?

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