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