chinese drywall

[oceanlovin'ea]

I have a theoretical question for you.

The client bought a new house, unfortunately it was built with Chinese drywall. The builder's insurance has moved them into an apartment and is paying them $125 a day per diem to cover the duplicate household expenses. Is any of the payment taxable income? Would it make a difference if it was the homeowner's insurance?

Thanks.

Linda

[solomon]

I have a theoretical question for you.

The client bought a new house, unfortunately it was built with Chinese drywall. The builder's insurance has moved them into an apartment and is paying them $125 a day per diem to cover the duplicate household expenses. Is any of the payment taxable income? Would it make a difference if it was the homeowner's insurance?

Thanks.

Linda

The excess, (if any), of the per diem over the normal living expenses would be taxable and reported on Line 21 - regardless of whose insurance.

[Kram BergGold]

my opinion

I had a client whose house burned down. The payments he received for living expenses were taxable. I would assume these payments are taxable as well.

[S T]

Pub 547

See Pub 547 - Insurance payments for living expenses

http://www.irs.gov/publications/p547/ar02.html

Sandy

[solomon]

If the casualty principles are applied, only the difference between the insurance reimbursement for living expenses and the increase in temporary living expenses over regular expenses before displacement is taxable.

[oceanlovin'ea]

Thanks

Thanks. I appreciate your input. I will check out the reference too.

Linda