How to Report Class Action Payments for Stocks

[Jeff Wisnia]

About once a month I receive an "invitation" to participate in a class
action suit over some investment I own or had owned in the past. Because
it's so easy nowadays to do an online search of past purchase and sale
transactions from the two brokerage firms I'm with I usually can't
resist looking up the required data and sending in a claim.

About half of those claims pay off, some for only ten to twenty dollars,
but a few have paid me much higher amounts. The remainder get me
nothing, often because my share is less than ten dollars and is
ineligible for payment per the terms of the suit.

When it comes to tax time I've been reporting those payments as long
term capital gains because they are always received more than six months
after I purchased the relevant investment.

Am I reporting them correctly?

Thanks folks,

Jeff
--
Jeffry Wisnia
(W1BSV + Brass Rat '57 EE)
The speed of light is 1.8*10^12 furlongs per fortnight.

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[ira smilovitz]

On Tuesday, August 8, 2017 at 8:35:14 PM UTC-4, Jeff Wisnia wrote:
> About once a month I receive an "invitation" to participate in a class
> action suit over some investment I own or had owned in the past. Because
> it's so easy nowadays to do an online search of past purchase and sale
> transactions from the two brokerage firms I'm with I usually can't
> resist looking up the required data and sending in a claim.
>
> About half of those claims pay off, some for only ten to twenty dollars,
> but a few have paid me much higher amounts. The remainder get me
> nothing, often because my share is less than ten dollars and is
> ineligible for payment per the terms of the suit.
>
> When it comes to tax time I've been reporting those payments as long
> term capital gains because they are always received more than six months
> after I purchased the relevant investment.
>
> Am I reporting them correctly?
>
> Thanks folks,
>
> Jeff
> --

Perhaps. Technically, any proceeds are a return of capital. If you still own the stock, you decrease your cost basis by the amount received. If you've sold the stock, you report the proceeds as either a short-term or long-term capital gain, depending on how long it's been since you purchased the stock. Note that long-term capital gains require more than one year of ownership, not six months.

Ira Smilovitz, EA

[Jeff Wisnia]

Thanks Ira. It looks like I guessed right with the long term capital
gain choice. I've never still owned the relevant stock in any class
action suit I've entered into and it's always been at least a year
before I receive any payments, sometimes as much as three or four years
after I respond to and become a participant in a class action suit.

Jeff

[Barry Margolin]

In article <lt2dnaRjtJCCuxbE...@giganews.com>,

Jeff Wisnia <Jwis...@DUMPTHIScomcast.net> wrote:

> Thanks Ira. It looks like I guessed right with the long term capital
> gain choice. I've never still owned the relevant stock in any class
> action suit I've entered into and it's always been at least a year
> before I receive any payments, sometimes as much as three or four years
> after I respond to and become a participant in a class action suit.

If you never owned the stock, how can it be a capital gain? A capital
gain is the profit you make from selling something for more than you
paid for it. If you never bought it you never sold it, so you don't have
a gain.

--
Barry Margolin
Arlington, MA

[ira smilovitz]

On Thursday, August 10, 2017 at 12:09:42 PM UTC-4, Barry Margolin wrote:
> In article <lt2dnaRjtJCCuxbE...@giganews.com>,
> Jeff Wisnia <Jwis...@DUMPTHIScomcast.net> wrote:
>
> > Thanks Ira. It looks like I guessed right with the long term capital
> > gain choice. I've never still owned the relevant stock in any class
> > action suit I've entered into and it's always been at least a year
> > before I receive any payments, sometimes as much as three or four years
> > after I respond to and become a participant in a class action suit.
>
> If you never owned the stock, how can it be a capital gain? A capital
> gain is the profit you make from selling something for more than you
> paid for it. If you never bought it you never sold it, so you don't have
> a gain.
>
> --
> Barry Margolin
> Arlington, MA
>
> --

"...never still owned..." = "...once owned, but not now..."

Ira Smilovitz, EA

[Jeff Wisnia]

ira smilovitz wrote:

> "...never still owned..." = "...once owned, but not now..."
>
> Ira Smilovitz, EA
>

Right you are Ira. I don't think I would have gotten unsolicited
information about a class action suit mailed to me unless I'd owned (or
maybe still own) the stock in question.

Jeff
--