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As the extended business deadline quickly approaches, we have put together the most commonly asked questions. View Lacerte Hot Topics.
As the extended business deadline quickly approaches, we have put together the most commonly asked questions. View Lacerte Hot Topics.
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- Re: When to report a farm insurance reimbursement?
When to report a farm insurance reimbursement?
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GlendaS
Level 1
03-22-2021
08:36 PM
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Taxpayer is a farmer on the cash basis. His neighbor's fire destroyed several acres of his unharvested corn crop. The corn would normally have been sold in 2021. Insurance reimbursed the taxpayer in 2020 for the value of the crop.
Can this income from the insurance company be deferred until 2021? I think in a federally decalared disaster area the answer is yes. I do not find much reference to it in a normal setting.
Opinions???
Thank you -- Glenda
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PKCPAMST
Level 5
03-22-2021
10:48 PM
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Glenda,
Your client can make an election under IRC Sec. 451(f) to defer crop insurance proceeds to 2021.
Here is what Sec. 451(f) says - “In the case of insurance proceeds received as a result of destruction or damage to crops, a taxpayer reporting on the cash receipts and disbursements method of accounting may elect to include such proceeds in income for the taxable year following the taxable year of destruction or damage, if he establishes that, under his practice, income from such crops would have been reported in a following taxable year.”
To make the election, check the box on Schedule F, Line 6c. To generate the election statement, complete Screen 46 Section Election to Defer Crop Insurance Proceeds.
Please note in the election statement and Screen 46 prompt Lacerte incorrectly refers to 451(d). The correct Sec is 451(f), as cited above.
-PK, CPA, M.S. - Taxation
BobKamman
Level 15
03-23-2021
11:22 AM
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But the following sentence in 451(f) says:
For purposes of the preceding sentence, payments received under the Agricultural Act of 1949, as amended, or title II of the Disaster Assistance Act of 1988, as a result of (1) destruction or damage to crops caused by drought, flood, or any other natural disaster, or (2) the inability to plant crops because of such a natural disaster shall be treated as insurance proceeds received as a result of destruction or damage to crops.
So does that limit it to only those government programs? Did the neighbor's insurance company pay this claim?
