AOL TimeWarner Securities Litigation

[Yardley CPA]

I have a client who received a $66.25 check as a part of the settlement of AOL Time Warner ERISA litigation. The letter states:

"Please be advised that all applicable taxes have been paid on the interest earned by the Net Settlement fund and the Fair Fund while the funds were invested pending distribution. You should consult with your tax advisor to determine the tax consequences, if any, of this distribution."

It would seem to me; this is taxable as interest income to my client. I believe the key phrase above is "while the funds were invested pending distribution." Wouldn't that suggest the actual amount distributed is taxable as interest income?

Thanks!