The IRS will most likely not have any identifiable number to associate the settlement payment you received to their internal records. However, you may have to include the settlement in your income.
You need to consider any loss in value of your property as a result of the chemical plant.
- If you suffered a loss in value of the property and the settlement is less than the adjusted basis (cost + improvements - depreciation) of your property, then the settlement payment is not taxable and does not need to be reported on your tax return. However, you must reduce your basis in the property by the settlement amount you received.
- If your settlement payment exceeds the basis of your property, then the excess will be considered income and you will include the excess portion in your return by following the steps listed below.
- If you sold the property, you will need to adjust your basis and report the excess as gain on Schedule D of your personal income tax return.
Please note that the discussion in regards to page 5 of the settlement agreement that was established to hold the money relate to the settlement fund itself, and not you as a beneficiary. The settlement fund had to be managed in a way consistent with Treasury Regulation Section 1.468B-1. The settlement fund had to invest the money to earn some interest income, and any taxes due as a result of earning the interest had to be paid from the settlement fund itself.
Please follow these steps to enter the settlement income in TurboTax Deluxe-Desktop:
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Open your return in TurboTax
- Select the "Federal Taxes" tab, and click on " Wages and Income"
- On the How do you want to enter your income? screen, select " I'll choose what I work on"
- Scroll down to " Less Common Income" and select "Miscellaneous Income"
- Select " Other reportable income", Answer Yes to "Any Other Taxable Income"
- Provide a description such as " Rocky Flats Settlement" and enter the amount of the settlement. Click Continue.
