Plainly, though, the tax stakes and issues can grow larger with a lawsuit recovery. The insurance proceeds that you receive for a casualty loss have a direct impact on the calculation for the potential casualty loss deduction. [2] The IRS provides frequently asked questions for disaster victims whose main home is in a Federally declared disaster area, available at https://www.irs.gov/businesses/small-businesses-self-employed/faqs-for-disaster-victims#saleofhome(link is external). Opinions expressed by Forbes Contributors are their own. "It's great if we ever get it . It will all play into how the IRS will tax the fire victim. "Wildfire victims have experienced unfathomable hardship. It is not clear how either one of these bills will fare, but large numbers of tax bills are introduced that never pass. In order to defer a casualty gain by reinvesting insurance or litigation proceeds, the replacement property must generally be purchased within two years after the close of the first year in which any part of the casualty gain is realized. The Trust is compensating California wildfire victims with money from the PG&E bankruptcy settlement, funded half in cash and half in PG&E stock. Fortunately, subject to requirements and limits, the tax law may treat this as an involuntary conversion despite the $900,000 gain. Incorporate for FREE + hire a lawyer with up to 40% off*. But it can take ingenuity to turn the gross settlement figure into a viable tax reporting strategy that is defensible to the IRS and (for Californians, to the Franchise Tax Board). In this example, the $4,900 remaining is your casualty loss deduction. That generally means the purchase price, plus the cost of subsequent improvements. "With all do respect, why not?" Understandably, many fire victims hope to face no taxes at all when they collect money from their insurance company or PG&E or Edison. As these examples illustrate, even dealing with insurance proceeds raises numerous nuanced tax issues. Even now that we're approaching, three years later, we're seeing situations where a number of people that I've personally met and correspond with all the time are still living in trailers and campers, really in temporary conditions. SAN FRANCISCO, October 05, 2022 -- ( BUSINESS WIRE )--The PG&E Fire Victim Trust (FVT) today sold 35 million shares of PG&E stock as part of its work to compensate the victims of . One law applies to PG&E recoveries, the other to Edison .
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