In 2017, I had to make an insurance claim for roof damage and received funds. I am still exploring contractors to help me with roof fixes. So effectively, I did not spend the amount received from Insurance.
While accounting the loss or income, will the insurance claim amount become income for 2017? Appreciate your help.
It depends. Might be income, might not be. Could be a reduction in the basis of your asset if insurance proceeds exceed the reduction in fair market value the damage caused.
In summary, you should speak to a CPA. They are usually worth it :)
More than likely it will not be an income. If the property is totally not destroyed, as in your case, the Insurance company usually gives you less than the actual decrease in the FMV of your damages because of your deductible. In fact, you could technically claim a loss for the deductible amount.
The only difference of not using that money this year is that you could not increase the basis of the property for the amount you spent to restore, but once you hire a contractor, you will capitalize the cost.
Thanks for your tips and advise @Lance Lvovsky & @Ashish Acharya . Appreciate your response. Here is a Challenge I have. I have properties/LLC's in multiple (5) states in US. Effectively what has been happening is that each state need to have its own entity or a DBA and correspondingly an accountant and an attorney for each.
As much as this country is USA, it is hardly U in terms of running business across states! I have ever been searching for ONE CPA & ONE Attorney to help me and has not found yet. That is why at times I have to rely on forums on many diff websites.
While you definitely need a lawyer in different states, you absolutely do not need a CPA in every state. If your current CPAs cannot work with issues across state lines, you need to find one that can.
The only thing an out of state CPA cannot do for you is represent you in state tax court for a state they are not licensed in. But they absolutely can do accounting work and file tax returns in multiple states.
@Naveen Desai As it was mentioned above, you don’t need multiple CPAs. What would be best for you is a team of CPAs at national accounting firm, where your CPA can have the resources to tap into if needed to help on a state/local level.
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