You Make the Call - Aug. 3, 2023

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.”