If you had paid the settlement in 2014 before you sold the land, it would have been treated as part of the cost basis, thereby reducing your capital gain. So at this point you report it as a capital loss transaction as Hal_Al indicates. Enter it as the sale of sale that you bought whenever you bought the original property, price is the settlement amount, sale date is when you paid the settlement in 2017, sale price is zero. This will create a capital loss. If you have no other capital gains this year, the loss will carry forward until you do have a gain to offset.
