Question: Dovydas, a longtime U.S. citizen, originally emigrated to the U.S. from Lithuania. As a result of Nazi persecution during World War II, a portion of his family’s property was unfairly seized; the family never regained this land. Dovydas recently received word that the Lithuanian government is planning to make a restitution payment for the seizure and Dovydas will receive $100,000 sometime in 2023. Will this be taxable on his 2023 federal income tax return?
Answer: No. The restitution payment will be neither taxable nor reportable. After the passage of the Economic Growth and Tax Relief Reconciliation Act of 2001, the IRS issued Tax Tip 2002-38, which said: “Holocaust survivors, their heirs or estates will receive the full benefit of any restitution payment made by governments or industry. Restitution payments are excluded from federal taxes and should not be included as income or listed anywhere else on federal tax returns.”
About National Association of Tax ProfessionalsThe National Association of Tax Professionals (NATP) is the largest association dedicated to equipping tax professionals with the resources, connections and education they need to provide the highest level of service to their clients. NATP is comprised of over 23,000 leading tax professionals who believe in a superior standard of ethics and exemplify professional excellence. Members rely on NATP to deliver professional connections, content expertise and advocacy that provides them with the support they need to best serve their clients. The organization welcomes all tax professionals in their quest to continually meet the needs of the public, no matter where they are in their careers.
The NATP headquarters is located in Appleton, WI. To learn more, visit www.natptax.com.
Information included in this article is accurate as of the publish date. This post is not reflective of tax law changes or IRS guidance that may have occurred after the date of publishing.