Insurance proceeds received because of the destruction of property are
A)included in gross income in all cases.
B)excluded from gross income completely.
C)included in gross income to the extent the proceeds are less than the adjusted basis of the replacement property.
D)included in gross income only to the extent the proceeds exceed the adjusted basis of the replacement property.

Question

Quizplus · Accepted Answer

Insurance proceeds received because of the destruction of property are generally excluded from gross income. However, if the proceeds received exceed the adjusted basis of the destroyed property, the excess is considered a gain and is includible in gross income. If the proceeds received are less than or equal to the adjusted basis of the destroyed property, there is no gain and the proceeds are not included in gross income. Option D correctly states that insurance proceeds are included in gross income only to the extent the proceeds exceed the adjusted basis of the replacement property.

Insurance Proceeds Received Because of the Destruction of Property Are