Welcome Guest. Register Now!  

LinkBack Thread Tools Search this Thread Display Modes
  #1 (permalink)  
Old 01-29-2018, 07:50 PM
Junior Member
Join Date: Jan 2018
Posts: 1
Unexpected Windfall - Most Tax Efficient Reporting?

Hey all,

I am in a unique situation for the 2017 tax year only and was wondering if someone could help direct me to the proper or most beneficial way to report an unexpected windfall.

I was a minority shareholder (for over a year) in a corporation. Due to a number of business disputes (breach of duties, etc) lawyers were involved (fees were paid) and ultimately the matter was settled. The minority shareholders were bought out of the company and my original investment was returned three-fold, with the addition of future payments capped at a certain amount. In the settlement, there was no designation that the lump sum was to be a return of capital, a sale of stock at a certain price, or a capital gain. Additionally, my income for the year was significantly lower than normal due to issues with the company - so I am not claiming a large windfall on top of a large salary.

Can anyone help me determine the most tax-efficient way to claim this windfall? I've couple approaches.

1. Deduct the original investment amount and attorney fees as "Return of Capital," using the future payments as the 100% gain portion instead of spreading the deduction out over the long course of the future payments. My primary concern with this is the lump sum received was larger than the original investment, so the ROC takes about 1/3 of the lump sum and may leave the 2/3 with a very high capital gains taxed at normal income rate?

2. Leveraging my lower-than-average income the past year, claiming capital gains and deducting attorney's fees as they exceed 2% of my AGI as the attorney's fees were clearly business related (attorney's used to recover investment income I would have paid tax on anyway.)

I'm open to hearing anything and everything. Further, is this something a representative at a place like TurboTax would be able to help answer, or should I find someone with some more expertise (and if so, where?)

Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote

Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

vB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off

Similar Threads
Thread Thread Starter Forum Replies Last Post
Tax efficient charitable donations Julie Pierce C-Corporation 1 05-08-2017 07:23 PM
Tax efficient setup for partnership ABCD Income 1 10-14-2013 05:18 AM
Tax efficient setup for partnership ABCD Income 0 10-13-2013 01:02 PM
Energy efficient credits mvp3 Tax Credit 0 02-10-2011 10:55 PM
What are Tax-Efficient Investment Strategies? Andreas Investment Strategy 1 07-31-2007 05:03 PM

Follow us on Facebook Follow us on Twitter Google Buzz Rss Feeds

» Categories
 » Income
 » IRA/Sep
 » Medical
 » Payroll
Forum for CPAs
Financial Planning