the loan payoff has nothing to do with how to report the vehicle disposition or the gain or loss
the IRS considers the car sold for the insurance proceeds. if you're using schedule C the business portion of the proceeds gets entered in the disposition section for the vehicle. this is technically wrong but Turbotax doesn't seem to have a way to show the disposition as due to casualty and thus include form 4684 in your return. the result is the same.
