• Loss or Gain
  • Complete Destruction
  • Partial Destruction
  • Tax Gain and Loss Details
  • Adjusted Basis
• When To Deduct a Loss
• Proof of Loss
• Figuring a Gain
• Replacement Property
• Replacement Period
• Postponing Gain
• Presidentially Declared Disaster Areas
• Additional Resources
• Sources and Credits

Tax Implications - Figuring a Gain

If you receive more insurance or other reimbursement than your adjusted basis in the destroyed or damaged property, you have a gain from the casualty. Generally gain is reported as income in the year you receive the reimbursement. However, depending on the type of property you receive, you may not have to report your gain. Your gain is figured as follows:

1. The amount you receive, minus
2. Your adjusted basis in the property at the time of the casualty or theft.

Even if the decrease in FMV of your property is smaller than the adjusted basis of your property, use your adjusted basis to figure the gain.

The amount you receive as reim- bursement for a loss includes any money plus the value of any property you receive, minus any expenses you have in obtaining reimbursement. It also includes any reimbursement used to pay off a mortgage or other lien on the damaged, destroyed, or stolen property.

You must ordinarily report the gain on destroyed, or other involuntarily converted property if you receive money or unlike property as reim- bursement. You can choose to postpone reporting the gain if you purchase replacement property similar or related in service or use to your destroyed, stolen, or other involun- tarily converted property within a specific replacement period..