Lawsuit settlement against former property manager

[guppyguy2009]

I received a settlement in a lawsuit against a former property manager who was not forwarding rent to us. I have not received a 1099-MISC from our attorney.

How do I account for this in our tax return?

[VictorW9]

Generally, rent is recognized when received. No need to accrue for rental income. Apparently, the issue of the rent is still not resolved. You will account for the rent in the year you receive it.

[guppyguy2009]

So are you saying this is accounted for as additional rent received in 2019 (the year I received the settlement)?

Or is the settlement just regular income on our 1040?

[Carl]

First, let me make this clear. While I have been a landlord of 3 rental properties myself for several decades, and have made use of the legal system to collect rent on more than one occasion, I AM NOT A LAWYER or a legal authority of any type, by any stretch of the imagination. I am assuming your case was settled and all required payments to you *and* to your legal representation were made prior to Dec 31 of the tax year.

All of the payout you "actually received' is included in rental income. Every penny of it. Doesn't matter if you received a 1099-MISC or not. While I doubt it, it is possible that the legal representative is not required to issue you a 1099-MISC.

Now if you physically had to turn around and pay your legal representation from that payout you received, then you will include the amount you paid in the "Miscellaneous Expenses" category which is the very last screen you deal with in the rental expenses section. If this involves more than one rental property you own, then you'll need to allocate your legal costs across all rental properties involved.

Now if your legal fees were withheld from the payment you received, then you will not claim it as a deduction anywhere on your tax return.