Hi TurboTax community, I recently received a small award from Apple due to a class action about a MacBook keyboard litigation settlement.
1. Are the awards from this class action suit taxable?
2. If the awards are taxable would this be under the category in TurboTax "Wages & Income" > "Less Common Income" > "Show more" > "Miscellaneous Income, 1099-A, 1099-C" > "Other reportable income"?
Much appreciated!
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From the IRS' Tax implications of settlements and judgments it seems that a class action suit could potentially be categorized as punitive damages and be considered taxable.
> Punitive damages are not excludable from gross income, with one exception. The exception applies to damages awarded for wrongful death, where under state law, the state statute provides only for punitive damages in wrongful death claims. In these cases, refer to IRC Section 104(c) which allows the exclusion of punitive damages. Burford v. United States, 642 F. Supp. 635 (N.D. Ala. 1986).
From the IRS' Tax implications of settlements and judgments it seems that a class action suit could potentially be categorized as punitive damages and be considered taxable.
> Punitive damages are not excludable from gross income, with one exception. The exception applies to damages awarded for wrongful death, where under state law, the state statute provides only for punitive damages in wrongful death claims. In these cases, refer to IRC Section 104(c) which allows the exclusion of punitive damages. Burford v. United States, 642 F. Supp. 635 (N.D. Ala. 1986).
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