Date posted: June 15, 2009
I received a legal settlement from a neighbor who cut down my trees. Is this money taxable to me?
I received a legal settlement from a neighbor who cut down my trees. Is this money taxable to me?
— Submitted by Lawrence
It depends. There is no tax on a recovery to the extent it does not exceed the basis of the property that was damaged or destroyed. If the recovery is greater than the tax basis in the property, the excess is taxable gain. In your case, since the trees are part of your home, reduce the basis in your home by the recovery. There is no taxable gain in your situation.
