One of my clients is an Scorp with a fleet of tractor-trailer trucks. They log about 6 million miles annually. Occasionally they have an accident.
Since incorporating 12 years ago, their vehicles have been involved in 7 accidents, only two of which they have been at fault. (I like one of the testimonial letters from a woman in Ohio: "I was pulling out onto the four lane, and this truck ran into me...") These seven accidents have totalled or partially totalled 5 tractors and 3 trailers.
All their vehicles are insured, and I have been treating their loss as a disposition on 4797. One of the lines on 4797 calls for a separation of items into a casualty. Since title passes to the insurance company, and the vehicles depreciate faster than their replacement value, I consider this a sale to a 3rd party rather than a casualty gain.
Am I correct? or do I need change my ways and report this as a casualty gain and pass through accordingly?
Should a "casualty" be something that happens 7 times in 12 years? Should there be something more extraordinary about a casualty? I have farmers that have calves and cattle die every year -- surely that couldn't be a casualty, but rather an ordinary item and a loss if he has any basis in the livestock.
There's not a lot of difference in taxation unless this trucking company ever has a loss on insurance. The shareholders have to give up 10% of their AGI before deducting the first penny of a loss...
Since incorporating 12 years ago, their vehicles have been involved in 7 accidents, only two of which they have been at fault. (I like one of the testimonial letters from a woman in Ohio: "I was pulling out onto the four lane, and this truck ran into me...") These seven accidents have totalled or partially totalled 5 tractors and 3 trailers.
All their vehicles are insured, and I have been treating their loss as a disposition on 4797. One of the lines on 4797 calls for a separation of items into a casualty. Since title passes to the insurance company, and the vehicles depreciate faster than their replacement value, I consider this a sale to a 3rd party rather than a casualty gain.
Am I correct? or do I need change my ways and report this as a casualty gain and pass through accordingly?
Should a "casualty" be something that happens 7 times in 12 years? Should there be something more extraordinary about a casualty? I have farmers that have calves and cattle die every year -- surely that couldn't be a casualty, but rather an ordinary item and a loss if he has any basis in the livestock.
There's not a lot of difference in taxation unless this trucking company ever has a loss on insurance. The shareholders have to give up 10% of their AGI before deducting the first penny of a loss...
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