Are settlements from inverse condemnation lawsuits taxable?
It depends. The rules regarding taxable consequences of property seizure are complex, and involve understanding the tax basis of the property as well as the nature of the settlement proceeds. Consulting a CPA or tax attorney familiar with these types of transactions is advisable.
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Answered by: Susan E. S. Howe, CPA, is principal of Howe Advisory in Strafford, Pa.