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We had a fire in which we lost livestock and were paid by the insurance company for the loss, what do we do with the proceeds of the check for tax purpose?
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You would treat it similar to sale. How you report it would depend on what kind of livestock it was. Sales of livestock held for draft, breeding, sport, or dairy purposes may result in ordinary or capital gains or losses, depending on the circumstances. In either case, you should always report these sales on Form 4797 instead of Schedule F. See Livestock under Ordinary or Capital Gain or Loss in chapter 8. Animals that you don't hold primarily for sale are considered business assets of your farm.
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