Capital loss offset

[kristen20031]

In 2016 I had a large capital loss from the sale of a stock. I was part of a civil suit against the O&Ds of the company related to the loss. We received a settlement. I got a 1099 on the proceeds from the settlement. Is there a way to offset the proceeds of the settlement from my capital loss since they are related? TurboTax does not seem to have any way to make a connection between the 2. Also, some of the funds on the 1099 is actually a reimbursement for some expenses I paid for the suit. Is there a way to deduct those expenses?

[ColeenD3 · Accepted solution]

No. A capital loss can only be counted against capital gains. Your settlement income is taxed as ordinary income. Which box of Form 1099-Misc is the income entered? Box 3 or Box 7?

@kristen20031

[kristen20031]

Box 3. Can I deduct the reimbursed expenses somehow?

[ColeenD3]

Unfortunately, no. Legal fees are no longer deductible as of 1/1/2018 due to TCJA. 

To enter:

1. Click on Federal Taxes at the top of the screen.
2. At the bottom of Your Income box pick the option in blue to help me add other income, then jump to full list;
3. Scroll down the page to the last section titled: Less common Income and click show more;
4. Select start or update next to the last topic titled Miscellaneous Income, 1099-A, 1099-C;
5. Scroll down to the last option titled Other reportable income and select start or edit;
6. When it asks, "Any other reportable income?" say yes then type in a description and the amount to report it on your tax return.

This will place it on "Other Income" line of your Form 1040

[kristen20031]

Thank you for your help.

[ColeenD3]

My pleasure.