Do you have to report as a gain insurance claim proceeds that exceed repair costs in one year but won’t be finished until the next?

by Ashley N. Blessing, CPA | Jan 03, 2019
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Say you receive proceeds from an insurance claim in 2017, but the proceeds exceed the repair costs incurred in 2017 but the repairs will not be completed until 2018. Do you have to report a gain or income, or can it be deferred until the repairs are completed?

In short, if the repair work straddles a year-end, you may defer the insurance proceeds received. Depending on what property was damaged and the net book value of the asset, you may have to recognize a gain if there are insurance proceeds in excess of the cost to repair. It is advisable to communicate with your CPA to understand the treatment of the proceeds in terms of adjusting the basis of the depreciable property affected by the damage.

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Answered by: Ashley N. Blessing, CPA, is a supervisor with Herbein + Company Inc. in Reading, Pa.

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