Discussion:Katrina insurance settlements
From TaxAlmanac, A Free Online Resource
Note: You are using this website at your own risk, subject to our Disclaimer and Website Use and Contribution Terms.
From TaxAlmanac
Discussion Forum Index --> Advanced Tax Questions --> Katrina insurance settlements
Discussion Forum Index --> Tax Questions --> Katrina insurance settlements
| 24 June 2008 | |
| 2007 Insurance settlement originating from Katrina loss of residence includes large attorney fees, includable in 07 income.Since attorney fees originated from the property they are capitalized and increase basis, which does taxpayer no good since fmv of loss was less than basis when casualty loss in 2005 claimed.
Am looking for way to deduct attorney fees in 07. | |
| 26 June 2008 | |
| Not all attorney fee awards are income. For example, if the fee award related to recovery of damages to property, the award would generally be treated as a reduction of basis and the fee paid to the attorney would generally be an increase in basis. | |
| 27 June 2008 | |
| This award is income because the loss was deducted on the 2005 return as a casualty loss. Reg 1.165 and Section 111 and S.Ct Banks and Banaitis cases.
That's the problem. Thanks for your reply. | |
| 29 June 2008 | |
| I am confused. If the attorney fees were capitalized, the recovery of such fees would be a recovery of capital. What am I missing? | |
| 30 June 2008 | |
Attorney fees are income when received. Attorney fees are not deductible when paid because they pertain to the property. Example:
Casualty loss 2005
Basis 378
FMV 395
Ins Reimb 199
Cas loss 179
2007 Insurance Reimb(unexpected)
150 To taxpayer
49 To Attorney
199 Income 2007
Basis
378 Beg of 2005
-198 ins reimb 2005
180 basis end of 2005
-199 insurance reim 2007
49 attorney fees capitalized
30 basis end 2007
Appreciate the help. Thanks. | |
To join in on this discussion, you must first
log in.
