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posted Apr 26, 2021 2:02:20 PM

If my LLC receives a payment as part of an insurance claim, does that count as income? Can I depreciate the item being replaced by the insurance money?

EG. Vehicle worth 10k gets totaled and I receive check from insurance company minus deductible ($1000.) Does the 9k count as income? If I spend the 9k on another vehicle, do I simply depreciate that purchase as I would any other business purchase?

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1 Replies
Expert Alumni
Apr 26, 2021 2:46:15 PM

You would treat it the same as if you had sold the vehicle for $9,000.  If the vehicle was fully depreciated, you would have a taxable gain of $9,000 on the disposition of the vehicle.  If the vehicle had an adjusted basis of $10,000, you would have a $1,000 loss.  If you then buy a new vehicle for $9,000 you would treat it the same as any other business purchase.