AboutHelen P. O`Planick, EA Expertise I am a tax professional, with experience in individual taxation. I would prefer not to answer questions about non-resident aliens or corporate taxation. Please do not ask me state related questions, unless the state is Pennsylvania. There are 42 taxing states and 42 TOTALLY different sets of state tax law.
Experience I have been preparing tax returns almost all my life. I have been in professional practice for 25 years and I am enrolled to practice before the Internal Revenue Service.
Organizations National Association of Enrolled Agents
Publications I am a prior Money Magazine Tax Test taker and have been quoted extensively in all media including monthly periodicals and books by tax authorities.
Question QUESTION: Ms O'Planick, I have a farm in texas and we have a little house on the property that we use every once in a while when we go down to the farm. It burned to the ground and the electric company's insurance is paying for it to be replaced. Is this money going to be taxable for the 2008 federal income tax?
ANSWER: If you are getting more then it costs to replace the building to the exact condition before the fire, then the difference is taxable income.
Helen, EA in PA
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QUESTION: I guess whatever we don't use to replace the structure will be taxable income. What if we use the money to payoff the loan?
Answer If the loan was on the structure ONLY, then you would be okay. But if you are paying the loan off on the farm, you have taxable income.
So let's say this house was worth $30,000 the day before the fire and to replace it to the exact condition the day before the fire now costs $60,000 and your check from the insurance is $75,000. You will have taxable income of $15,000, no matter what.
