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Wallstreet Esq.
Wallstreet Esq., Tax Attorney
Category: Tax
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Experience:  10 years experience
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I have an involuntary conversion which results in business ...

Customer Question

I have an involuntary conversion which results in business income of $10,000. I have received $2,000 of this income from the insurance company prior to year end, and will receive the other $8,000 after year end. The settlement date was after year end. For taxable purposes, is the $2,000 received in prior year recognized in current year or in prior year? And are there any other cases that are similar to this one?
Submitted: 8 years ago.
Category: Tax
Expert:  Ed Johnson replied 8 years ago.


Are you replacing the property?

What was the value of the property at the time of the conversion? you state it has resulted in business income of 10K, but you are not saying it represents a capital gain?

Customer: replied 8 years ago.
Reply to Ed Johnson's Post: All I know is that this is business income that would have been earned but because of the loss of property it was not. So the 10,000 was the settled on amount given by the insurance company. We are replacing the property, but that amount is not included in the 10K.
Expert:  Ed Johnson replied 8 years ago.


Thank you for that information. But here is what is involved.

I am still not getting enough information about your loss.

The issue here is, that whether or not report the income and when depends on the circumstances of the loss including what was lost and how it was lost.

Did peice of equipmenet get stollen, or a building burn, etc?

If you are replacing it, you have a time period in which to replace it before you report it and, and to determine if it is a gain or loss on the property.

I am sorry, but I do not want to have to resite the entire law and text of how these things are handled, that would take a couple of hours.

I would like to target my answer to your circumstances.

Please tell me more about your loss, do not hold back.



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