This is a 60 year old receiving a settlement amount from Litigation Settlement Fund on a 1099-r, Fed income tax withheld. Question is why is this taxable? Listed as normal distribution (7). Client needs clarification. Thanks
In general, litigation settlement proceeds stem from income that would have been taxable if you had not had to sue for it. So, in essence, you are receiving income that you should have received anyway, and if the income would have been taxable if not associated with the lawsuit, it will be taxable when you receive it because of the lawsuit.
Without knowing more about what the lawsuit was for, I cannot be more specific.
Thanks Thomas.... Also can you tell me where I need to report #7 Foreign tax paid on 1099 DIV 14.15?