Miroquagmire is a homeowners association became active in June of 2022 with the turnover of the common elements from the developer to the homeowner's association. During Hurricane Ian the Miroquagmire experienced extreme flooding damage that should have been mitigated by the developer's designed drainage system. Miroquagmire sued the developer and received a judgment of $5,000,000 for failing to build the drainage system as designed.

The funds received are considered:

A - A proportional increase in basis of each homeowner

B - Gain which is proportionally attributed to each homeowner

C - Ordinary income excludable under IRC 104

D - Unreported income