@Opus 17 wrote:- You bought a car for $20,000, it was totaled, and you received $25,000 in replacement cost coverage. $5000 is taxable.
- You bought a car for $20,000, and used it in business and claimed $10,000 of depreciation. It was totaled and you received $15,000 present value as damages. Because your adjusted cost basis is reduced by depreciation, your basis is now $10,000, so $5000 is business income.
Only thing is that if ALL of the insurance proceeds are used to buy replacement property, like a replacement for the car, then any gain could be deferred under Section 1033.
The replacement property must be of similar or like-kind, however.
