I received a settlement from a class action suit involving stock I own. Is this taxable?

Taxation of the payment depends on various factors. If, for example, the settlement was the result of accounting errors erroneously inflating the price of the stock, then the payment is a refund of your initial purchase price. It’s an adjustment to basis if you still own the stock or capital gain that must be reported if you sold the stock before the settlement. If part of the settlement is for punitive damages or interest, these income items are reported as ordinary income.