This article will help you report a total-loss casualty for a business asset when insurance is used to purchase a replacement asset.
If the casualty was for personal property and occurred in a federally declared disaster area:
- Any gain on insurance or other reimbursement may be nontaxable if the replacement asset was purchased within the specified replacement period.
If the casualty was for business or income-producing property that occurred within a federally declared disaster area:
- The gain on any insurance or other reimbursement may be nontaxable if a replacement asset was purchased within the specific replacement period.
If the casualty was for business or income-producing property that occurred outside a federally declared disaster area:
- Any gain on insurance or other reimbursement, regardless of whether a replacement asset was purchased within a two-year period, is still taxable.
For additional information, reference Publication 547 Casulties, Disasters, and Thefts.