Am not sure what to do regarding the income received from the Rocky Flats Settlement Claim in Colorado.

[rldwood]

My wife and I received the check from the Rocky Flats Settlement Claim.  I called the legal firm handling the case via their toll free number and asked about a 1099 form.  The gentleman said that no 1099 form would be sent out.  Am using TurboTax Deluxe to file a return so not sure how to handle this situation.  Those I talk to regarding this has an more idea than us.  

[LauraVF · Accepted solution]

The IRS will most likely not have any identifiable number to associate the settlement payment you received to their internal records. However, you may have to include the settlement in your income.

You need to consider any loss in value of your property as a result of the chemical plant.  

•  If you suffered a loss in value of the property and the settlement is less than the adjusted basis (cost + improvements - depreciation) of your property, then the settlement payment is not taxable and does not need to be reported on your tax return.  However, you must reduce your basis in the property by the settlement amount you received.

• If your settlement payment exceeds the basis of your property, then the excess will be considered income and you will include the excess portion in your return by following the steps listed below.
• If you sold the property, you will need to adjust your basis and report the excess as gain on Schedule D of your personal income tax return.

Please note that the discussion in regards to page 5 of the settlement agreement that was established to hold the money relate to the settlement fund itself, and not you as a beneficiary. The settlement fund had to be managed in a way consistent with Treasury Regulation Section 1.468B-1. The settlement fund had to invest the money to earn some interest income, and any taxes due as a result of earning the interest had to be paid from the settlement fund itself. 

Please follow these steps to enter the settlement income in TurboTax Deluxe-Desktop:

1. Open your return in TurboTax
   
   
2. Select the "Federal Taxes" tab, and click on " Wages and Income" 
   
   
3. On the How do you want to enter your income? screen, select " I'll choose what I work on"
   
   
4. Scroll down to " Less Common Income" and select "Miscellaneous Income"
   
   
5. Select " Other reportable income", Answer Yes to "Any Other Taxable Income"
   
   
6. Provide a description such as " Rocky Flats Settlement" and enter the amount of the settlement. Click Continue. 

[rldwood]

Thank you - I'll try that.  I did not know if there was a specific # or some other ID associated with the Rocky Flats Settlement which would be used by the IRS to track this entry or not.  What about the comment I read regarding being reimbursed for taxes paid by some "Fund" that was supposedly set up by the court?

[LauraVF]

You are welcome! I made some changes to my answer above. Please read.

[rldwood]

Thanks again.  This has cleared some things up.

[rldwood]

In regards to the question I submitted to you yesterday as to whether the Rocky Flats Settlement is taxable, I noticed in one of the "similar questions" below on this page, the first question asked was similar to mine.  That person did not receive a 1099 form either.  In my case, when I called the legal firm yesterday handling the Rocky Flay suit / settlement, asking as to when I could expect a 1099 form I was told that I would NOT be receiving one.  In the answer to the question previously mentioned, the response to that person was stated:   "Also, if the funds you received are considered taxable income, then you will receive a tax form.  Most settlements are reported on form 1099's. I would wait until after February 15, 2017, to assume that ones not coming. It could still be in transit."  Again, in my case I was told directly from the legal firm who is handling the Rocky Flats case that I definitely would not receive one.  To me, that is saying that it is not taxable.  Please respond.  Thank you.

[LauraVF]

Entities are not required to issue a 1099 for various reasons, including when total payments made to the person are less than $600.  

I agree with waiting a few more days, as often times entities may wait until the last day to issue/send 1099s and W2s.

In the event you do not receive the 1099, you are still responsible for filing and including the income on your tax return.

[rldwood]

So you are saying that the full amount of the Rocky Flats settlement received is taxable?

[LauraVF]

It depends on the circumstance and type of settlement you received. It is my understanding that your payment was for the loss of property value caused by contamination from a radioactive substance used in the Rocky Flats nuclear plant.

As I mentioned in my initial response, if your basis on the property was less than the payment you received, then the payment is not taxable. You just have to reduce your basis by the settlement amount.

If the payment received is more than your basis in the property, then the excess becomes taxable income.

I mention these two scenarios because I do not have more detail about your particular circumstance. I am providing you with an answer based on the public information that is available to us.

Below are more situations that can cause a settlement to be taxable or not. Please read.

 <a rel="nofollow" target="_blank" href="https://ttlc.intuit.com/replies/4787698">https://ttlc.intuit.com/replies/4787698</a>

[rldwood]

Please clarify for me what you mean by "basis".  I have asked a few individuals who are in the same situation as I and they do not understand the meaning either. Thanks.

[LauraVF]

Absolutely!

First, you have to use June 7, 1989, as your date for calculating the basis.

Second, you do the following math:
      Basis = Cost of the property + Improvements made to the property - Depreciation on the property

For tax purposes, basis means the amount of investment you have on a property, which is why you include how much you paid, how much you have spent on improvements and reduce this total by normal depreciation.

[rldwood]

Thanks.  Let's say I paid $58,000 for the property in 1980.  The settlement we received regarding this suit uses the year 1989 as the year related to the loss in property value for the homeowner.  The improvements you mentioned - do you mean the improvements between the year we bought it (1980) up to the year 1989 (the focal point of the suit)?  Or improvements made from the year we bought it up to the present (2018)?  Also where does the depreciation figure come from?  Hopefully these questions will help someone else as well as us.  Because this is all new territory for us, having never received a settlement before.  Thanks again.

[LauraVF]

You are on the right track!
The math will be $58K + improvements from 1980 until 1989.  Please disregard depreciation because I assume you used the house for personal use only, not business use.

The following link will provide you with more information on figuring out your basis. <a rel="nofollow" target="_blank" href="https://ttlc.intuit.com/questions/3147446">https://ttlc.intuit.com/questions/3147446</a>

If you have more specific questions, please post separate questions on the forum so we can track and address them properly.