Lost use of funds

[M7047]

Have a client that received money for "Lost use of funds" and being told it would be reported to the IRS as required by law.

They never received anything other than the letter. Would I just place the amount like it was an interest payment or would that confuse things, since there was no 1099?

[Max W]

Please elaborate a little more on this. How were the use of funds lost?  Who issued the check?  Was it an insurancepayment?  Were the lost funds reported as a deduction?

 

[M7047]

It was from their mortgage Co. They issued them a check. This is the letter they received.

 

Nothing was ever deducted, as they can't itemize. Thanks

17 minutes ago, Max W said:

Please elaborate a little more on this. How were the use of funds lost?  Who issued the check?  Was it an insurancepayment?  Were the lost funds reported as a deduction?

 

 

[mcbreck]

Personally I'd claim the $396 as interest earned.

[jklcpa]

I agree that the tax portion of the refund is nontaxable since they used the standard deduction, and also agree with mcbreck to report the $396 as interest income.

[M7047]

33 minutes ago, jklcpa said:

I agree that the tax portion of the refund is nontaxable since they used the standard deduction, and also agree with mcbreck to report the $396 as interest income.

I was thinking that the 396 should be interest, just wasn't sure if it would flag anything since they never received a 1099.

 

Thanks everyone.