@ChrisPD wrote:
So if my adjusted basis in the example is $6k ($46k original purchase price - $40k settlement), and I traded the car in this year (2022) on a new car and the trade in value was $22k, then my taxable gain would be $16K, which is the trade in value of $22k less the adjusted basis of $6k. I don't know whether or not I'm going to receive a 1099 because the attorney was very quick to tell me they don't advise on tax matters and would not tell me whether or not I'll get a 1099. Would this all be reported as other income or some type of gain on sale of? The vehicle was used for personal use only...I don't own a business.
You basically sold the vehicle to the dealer for $22K, so if you previously had the settlement, you would report this as a long term capital gain (assuming you owned the car more than 1 year). You can manually enter this in Turbotax under the section for sales of stocks and other investments. Report the purchase date as-is, the purchase price as your adjusted cost basis of $6K, the selling date as the trade-in date, and the selling price as the $22K. Long term capital gains are taxed a bit less than regular income.
(If you think about it, another way to report it would be as you purchased the car for 46K, and sold it for 22K+40K, which will equal the same ultimate result of a long term gain of $16K.)
