Taxability of PG&E Wild Fire Settlement

[KMACK]

My client owned a house in Greenville, CA and lost that it during the Dixie Fire in 2021.  The basis was $150K at the time it was distroyed and the insurance company paid her about $300K that same year to rebuild.  She did not rebuild.

She along with several other residents of the city sued PG&E (the utility company) and won settlements in 2023 with additional money paid to her in 2023.  How should the additional settlement money from PG&E be treated for tax purposes?  She treated the money received from the insurance company in 2021 as forced sale using the $250K exclusion.  However, she has now received an additional sum of money.  Is the additional money all taxable, or should it be considered part of the forced sale and added to the insurance settlement?

Also, she still owns the land where the house used to be, but is not sure what she wants to do with it.

Thank you,

[BobKamman]

You should be tracking this bill, which has passed the House and is awaiting possible action in the Senate.

https://www.govinfo.gov/app/details/BILLS-118hr5863eh 

[Just-Lisa-Now- · Accepted solution]

Ive got about a dozen clients with wildfire money, as of right now, it is taxable for federal purposes, but its not taxable to California.  You make the adjustment on the Form CA Other Income Statement theres a line for Fire Victims Trust Line 24.

This bill has been up for vote multiple times now and never passed, hopefully this time it will make it through!

[abctax55]

"...hopefully this time it will make it through!"

And soon would be nice 😉