Do I have to declare a lemon law settlement to the IRS?

[Dbaraj]

Got a $5,000 settlement for a lemon law case in California. I remember I paid $15,000 for the car and a few years later it broke down. Had to do repairs and to top it off I had to sell it to the dealer to get rid of it so I could get a new one after all that about 6 months later I got a settlement for $5,000. 

Do I still have to declare it? Never got a 1099-MISC or anything like that so I dont know what to do. 

Edit: I sold my car to the dealer but I also gave the dealer an additional $2k so they could take my car since they knew about the cvt problem.

[ee-ea]

If the $5,000 plus what you got got from the dealer is less than $15,000, you have a nondeductible personal tax loss.  In other words, nothing go into your tax return.

[Mike9241]

the payment would be taxable only if you took a tax deduction for the vehicle like on schedule C or E

[Dbaraj]

I worded it so wrong so I apologize but when I meant I sold it to the dealer I actually had to pay 2k more for them to take the vehicle because they knew about the cvt problem and they knew that car wouldn't be sold anymore.  So i got less than $15,000.

So does this mean I don't report it? 

[Dbaraj]

can you explain to me what's a schedule C or E? 

[LindaS5247]

Schedule C:

 Use Schedule C (Form 1040) to report income or loss from a business you operated or a profession you practiced as a sole proprietor. An activity qualifies as a business if:

• Your primary purpose for engaging in the activity is for income or profit.
• You are involved in the activity with continuity and regularity.

Schedule E:

Use Schedule E (Form 1040) to report income or loss from rental real estate, royalties, partnerships, S corporations, estates, trusts, and residual interests in real estate mortgage investment conduits (REMICs).Sep 28, 2022