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I would consult an attorney about this. I am not sure where you are but capital earned in this country is taxed. Inheritances are not unless the total is over 5 million. But I am not sure about settlements.
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I just read it has to do with the state where you live if you live in the USA. This is surely a question for an attorney.
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If it was "compensatory" damages, no tax. If it was "punitive" damages, you pay tax. If you did not get a 1099 with it, it was most likely compensatory. Attorneys will not answer tax questions, they will refer you to a tax person.
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