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A client is receiving an insurance settlement for a

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motorcycle that was totaled, if...
A client is receiving an insurance settlement for a motorcycle that was totaled, if the the settlement is purely to replace the cycle, will there be any tax liability?
Submitted: 2 months ago.Category: Tax
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5/31/2018
Tax Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 2 months ago
Chad EA, CDFA®, CFP®
Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional
Category: Tax
Satisfied Customers: 2,762
Experience: IRS Licensed Enrolled Agent, CDFA ® CFP ®, MBA
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Hello!

The settlement will not be taxable since settlement was awarded to replace the motorcycle cost.

"Loss-in-value of property

• Property settlements for loss in value of property that are less than the adjusted basis of your property are not taxable and generally do not need to be reported on your tax return. However, you must reduce your basis in the property by the amount of the settlement.

• If the property settlement exceeds your adjusted basis in the property, the excess is income

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Tax Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 2 months ago

I have placed below a helpful link to IRS.Gov concerning "Settlement Taxability."

https://www.irs.gov/pub/irs-pdf/p4345.pdf

The sheet is only two pages and I find the information helpful for a quick reference.

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Tax Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 2 months ago

Please let me know if you do have any follow up questions or concerns.

Thank you!

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Customer reply replied 2 months ago
awesome thanks!
Tax Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 2 months ago

Thank you for requesting me.

Have a great day

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Tax Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 2 months ago

Hi, please take a moment to accept the answer if you have no further questions.

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