Land Damages

[gman]

Client is receiving damage payments for sesmic damages to ranch. The payments
and contract will state that the entire amount is for damages. Would any of this
be taxable. (or just reduce basis in land to 0)

Thanks

[Bees Knees]

It is a casualty loss. The payments are treated as reimbursements for the casualty loss sustained. Thus, no deduction and no income. However, you do have to reduce basis accordingly.

[jainen]

There could be income

There could be income. Casualty loss is based on reduction in value, which might be less than the cost to rebuild insurance payment.

[cpadan]

Just curious, how did they determine the value of damages to the land? Was some of this related to improvements?
Dan

[veritas]

Better yet. Who hurt my dirt!