We received a 1099 MISC related to a legal settlement. The amount reported in box 10 of the form represent additional earnings for a property we sold a few years ago as well as attorney fees we incurred to obtain the additional earnings. Had we received these additional earnings when we sold the property, these earnings would have been treated as long-term capital gains. It appears when we enter them on our 2024 1040, they will be treated as regular income and thus taxed at a much higher rate. This doesn't seem fair.
Can we go back and apply the earnings as additional capital gains in the year in which we sold the property by filing an amended return? If not, is there a way in which we can report the earnings to reflect the fact they represent long-term capital gains?
Any assistance would be greatly appreciated!
It's not clear why there was a settlement. However legal settlements are reported as you indicated and legal fees are not deductible under current tax law.
Other Miscellaneous Income: