It depends. A lemon law settlement is only taxable for the part that exceeds your loss, which is the amount you paid compared with the fair market value of the 'lemon' at the time you bought it.
Subtract the fair market value from $43,000 and compare the result to the $27,000 you received. If your loss is less than $27,000, then the excess would be taxable. Note that legal fees are not deductible.
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