If the amount you receive in insurance or other reimbursement is more than the cost or other basis of the property, you have a gain. If you have a gain, you may have to pay tax on it, or you may be able to postpone the gain.
How To Postpone a Gain
You postpone reporting your gain from a casualty or theft by reporting your choice on your tax return for the year you have the gain. You have the gain in the year you receive insurance proceeds or other reimbursements that result in a gain. If a partnership or a corporation owns the stolen or destroyed property, only the partnership or corporation can choose to postpone reporting the gain.
Required statement.
You should attach a statement to your return for the year you have the gain.
This statement should include the following.
• The date and details of the casualty or theft.
• The insurance or other reimbursement you received from the casualty or theft.
• How you figured the gain.
Replacement property acquired before return filed.
If you acquire replacement property before you file your return for the year you have the gain, your statement also should include detailed information about all of the following.
• The replacement property.
• The postponed gain.
• The basis adjustment that reflects the postponed gain
• Any gain you are reporting as income.
Replacement property acquired after return filed.
If you intend to acquire replacement property after you file your return for the year in which you have the gain, your statement also should state that you are choosing to replace the property within the required replacement period. You should then attach another statement to your return for the year in which you acquire the replacement property. This statement should contain detailed information on the replacement property. If you acquire part of your replacement property in one year and part in another year, you must make a statement for each year. The statement should contain detailed information on the replacement property acquired in that year.
Pub. 547.
