Landlord Lawsuit Settlement Payment

[mgc6288]

I just won a $50k lawsuit settlement.  An interested party is my rental LLC.  I've read that not all legal fees are tax deductible from a personal side but I'm wondering if they are since I paid them from my LLC?  

So first question is it better to claim through the LLC Schedule E or me personally?  

Second, I believe the money is taxable under a 1099-MISC.  Am I going to be given the money with a Box 3?  I ask because TT does not allow me to enter a 1099-MISC Box 3 "other income."  

Or do I have to claim as personal income and reimburse the LLC for the amounts paid thus no legal fee write off?  Please advise.

[Mike9241]

if you have rental real estate and the settlement only involved this property then the income is taxable but the legal fees are deductible. if it involves both nonrental and rental real estate then the settlement is taxable but a portion of the legal fees allocable to nonrental real estate is not deductible. 

see this IRS web page

https://www.irs.gov/government-entities/tax-implications-of-settlements-and-judgments 

[mgc6288]

I guess how does one decide the difference between personal vs. rental LLC?  The rental LLC is a voluntary participant given the side effect the lawsuit could have had against the rental LLC.  

Obviously a $10k legal deduction would be helpful.  This is not rent from a tenant but TT will only take 1099-MISC Box 1, not Box 3.  Thoughts?