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Level 1

Solved

1099 MISC - Heir to Heir Settlement

1 reply
74 views

An heir (1) sued another heir (2) and not as part of estate. Heir 2 settled with heir 1 by giving $10,000 of heir 2 inheritance to heir 1 to settle as nuisance claim. This settlement is not part of heir 1 inheritance but additional monies received. Does heir 2 need to send heir 1 a 1099 MISC to report additional income for tax purposes to heir 1?

Level 15

Expert Reviewed

No.

First, a 1099 only needs to be issued by businesses under certain situations, not individuals.

Second, legal settlement income is taxed according to how the income type it is a settlement for would have been taxed. Since a cash inheritance would not have been taxable to person 1, the settlement is also not taxable. (And since the cash inheritance was never taxable to heir 2, the settlement is not a deductible legal expense by heir 2.)

Answer

Level 15

Expert Reviewed

No.

First, a 1099 only needs to be issued by businesses under certain situations, not individuals.

Second, legal settlement income is taxed according to how the income type it is a settlement for would have been taxed. Since a cash inheritance would not have been taxable to person 1, the settlement is also not taxable. (And since the cash inheritance was never taxable to heir 2, the settlement is not a deductible legal expense by heir 2.)