Federal Taxes: Gift Cards As Income

I was involved in a class action lawsuit 2 years ago. I was issues a settlement of $500 in the form of a check and $1100 in gift cards only redeemable at the specific restaurant that was involved in the lawsuit. My 2012 taxes reported the $1100 on my w-2 as wages and I now have to pay back taxes on that amount. My wife was also involved in the case which adds an additional $900 in gift cards which was also reported on her w-2.



My question is, how can gift cards that are specific to one business that does not offer general merchandise for redemption become taxable wages? If I cannot use the gift cards for general merchandise, how can it be income?



Any thoughts would be appreciated.



Dafloata

Federal Taxes: Gift Cards As Income