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Question:
I
have an IRA with you and I received an usually small
check in connection with the account. It's the result
of a class action suit for one of my IRA stocks. Can
I put the check in my checking account?
D.
Jeffreys
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Answer:
Dear
D.
Jeffreys,
I
don't recommend that you deposit the check anywhere
other than in your IRA. If you do, then the IRS will
regard it as a "distribution" and distributions, as
you know, are subject to income tax, and in some cases,
penalties.
When
you send the check to us (at address BUYandHOLD, c/o Freedom Investments, Inc. 375 Raritan Center Parkway, Suite D Edison, NJ 08837), please include a letter stating how and
why you received the check and along with your BUYandHOLD
account number.
By
putting the check into your IRA, you'll protect the
money from being unnecessarily taxed. However, because
this particular money is NOT an IRA contribution,
unfortunately it is NOT tax deductible.
History
of Class Action Suits
The
original class action suit originated in the 17th
century in England and was known as a "bill of peace."
It was used when a large number of people shared a
common grievance. The case then could be tried by
representatives, with the final decision or judgment
rendered as binding to all involved. The result was
greater efficiency than if each case was tried individually.
In
this country the use of the bill of peace was promoted
by Supreme Court Justice Joseph Story in the 1830s.
He saw it as a way to resolve multiparty conflicts
quickly and efficiently. Today we see class actions
as a means of trying to achieve reform (in civil rights
cases, for example), to promote consumer protection,
to speak up against fraud and price fixing and to
compensate many plaintiffs who were injured by one
defendant, such as in asbestos cases.
If
the topic is of interest to you beyond the fact you
received an unexpected check, see if your library
has:
Stephen
Yeazell's From Medieval Group Litigation to the
Modern Class Action. (Covers the legal history
of suits.)
Charles
Carron's The Suing Game: Preventing & Surviving
Class Action Discrimination Suits. (From the corporate
viewpoint.)
Good
luck!
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