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EricDP

Law suit income?

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Several years ago I acquired some real estate as part of a settlement in a law suit. I've just sold this real estate. As I understand it, the proceeds of a law suit are not taxable income. But what I'm not sure about is if the proceeds from the law suit would differ from the value of the sale of the real estate (in other words, is there an adjusted cost base?). Would the value of the tax-free amount be determined:

 

When the real estate is sold?

Or when it was acquired?

If when it was acuired (which was some time ago), how would that value be established if no appraisal was done at the time?

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With any disposition, there is an adjusted cost base -- the value of the property when acquired. Subtracting that from the value realized at the sale (minus expenses) is the reported value of the disposition.  

 

This is a tricky situation. I would suggest you speak to a tax lawyer or accountant to determine the value at the time  you acquired the property (ACB) and what if any expenses were incurred when it was acquired or since that can reduce your tax liability. 

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