You have a capital loss carryover. It can be used to offset capital gains - which is money that you make selling investments - or it can be used up at $3000 a year until it is gone.
The money that you recovered in the lawsuit was money that you had written off as a capital loss 12 years ago. It turns out that that capital loss was not real - the money has shown up in your bank account to prove it. So this needs to be entered as a capital gain. You will enter it in the area for a 1099-B and that capital gain should remove that $3000 loss that you've been taking.
I am going to urge you to go see a tax professional. This is a tricky business, this lawsuit recovery. It would be best to get all of the details right. I would file an extension and go see someone as soon as possible.
@GGLG
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