Some states have enacted legislation to compensate victims of forced sterilization under state programs and have made payments to those victims. The IRS issued FAQs to clarify the tax treatment of these payments (FS-2023-11). Highlights of the FAQs:
The difference between amount realized and adjusted basis on the sale or exchange of capital assets. Long-term capital gains are taxed favorably. Capital losses are deducted first against capital gains, and then again up to $3,000 of other income.