Class Action Recovery--Corporation Management misled the market on the Corporation's financial condition

[Paul JJ]

I received this year my share of a class action suit in which management was said to have made false statements relative to the financial condition of that company and therefore artificially inflated the share value over a period of time during which I purchased my shares.  I still own those shares.  Intuitively it seems that the funds should be treated as a return of capital and therefore just lower my stock basis without any tax effect until the shares are sold.  Yet I have found no authoritative literature dealing with this matter.  Can someone help?  Also, I am wondering how I should treat on turbotax any 1099 received on this settlement.  Should a 1099 be issued, simply ignoring it would may trigger an IRS  inquiry.

[Mike9241]

see this article

https://www.sonnlaw.com/faq/securities-litigation-settlement-tax-treatment-settlements-taxable/#:~:t... 

i would conclude since you still own the securities (none have been sold) basis reduction is proper

[Paul JJ]

Thanks for your help