Court Settlement - Election under Section 1033

[pete-parkinson54]

We received payment from a court settlement related to destruction of our home by fire in 2017. Our CPA has advised that the portion of this settlement related to the real property (as opposed to emotional distress) can be excluded from taxable income via an election under Code Section 1033(a)(2) not to Recognize Gain from Compulsory or Involuntary Conversion, and he has provided us with a memorandum to that effect. I don't need any further advice on the tax issues, but my question is how to convey/include this information as part of our tax return, which I am preparing with TurboTax. Nothing seems to fit.

[ThomasM125]

If you didn't receive a form reporting the income, then you don't need to report it if it is not taxable. If you did receive a form, let us know what form you received and we can help your further.

[pete-parkinson54]

Thanks Thomas. I did not receive a form (nor do I expect to) but we are making an "election" (per Section 1033) about how to treat this money. CPA advised we should let the IRS know we're making this choice, but maybe not.

[ThomasM125]

OK, then what you should do is attach form 8275 Disclosure Statement to your return on which you disclose your position. You will have to mail your tax return in to do this.

Form 8275