Howdy everyone -
Here is the scenario if someone can walk me through this please:
1. Rental property burnt down on June 30, 2018.
2. Adjusted Basis: $160K (200K Cost less 40K depreciation)
3. Insurance Proceeds were supposed to be 300K but insurance company issued a check for $230K on July 31, 2018, which the taxpayer intentionally did not cash until 2019 - I don't know if that's relevant.
4. The remainder 70K (300K - 230K) of the insurance proceeds were NOT immediately disbursed by the insurance company due to some environmental measures/clearance that they had to pass by the city prior to issuing that to the taxpayer. The 70K was eventually issued in Feb 2019.
5. Lastly, the taxpayer kept the lot and sold it for 60K in March 2019.
Here are my questions:
1. How would we treat the 70K from #4 above? Does it get included with the $300K (i.e. Sale price of the asset) or does this entail an installment sale since it was issued in the following year i.e. 2019?
2. To compute the gain on the sale of the lot, would we take the cost of the land on books and deduct it from the selling price to compute gain or loss?
I would appreciate all the feedback that I can get!
Thank you all.