A number of years ago we invested in a currency trading investment opportunity which turned out to be a scam. It was not a Ponzi scheme, but upon determining that our investment disappeared, we wrote off the investment as a long term capital loss at $3k per year for a number of years. We are part of a class action lawsuit and in 2023 we finally started to see some of our money returned, about 50%. Our plan was to treat any money returned as a long term capital gain, but we received a 1099-MISC from the law firm. Question – do we have to treat the money received as ordinary income, or is there a way to treat it as a long term capital gain, and if so, how do we show that in Turbo Tax? Thanks in advance for any help.
