Q: Is a settlement awarded to victims of unlawful foreclosure practices, resulting in loss of real property, taxable?
The attorneys general for 49 states along with the federal government reached a Settlement with SunTrust to provide relief to eligible borrowers who lost their homes to foreclosure between January 1, 2008, and December 31, 2013. I am one of these eligible borrowers. On September 30, 2014, the United States District Court for the District of Columbia entered the Consent Order addressing SunTrust's alleged misconduct regarding its mortgage servicing and foreclosure practices. SunTrust created a 40 million dollar fund, and each borrower received a settlement in the amount of $1,330 in 2015. A 1099 will not be issued. Is this settlement considered taxable income?
A: Since August 1, 1998, generally, settlements and awards for only “personal bodily injury” is exempt from taxation under the IRC 104. I think your case should be looked into, and am not sure if you are eligible. The information presented herein is for general purposes only. It is not intended to, and may not be construed as legal, tax or accounting advice. For specific advice, please consult a tax attorney in person. Good luck. Zaher Fallahi, Tax Attorney, CPA (California).
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