Insurance reimbursement

[Marie]

Client receives $100,000 for hail damage on farm building.  Building is not damaged enought to replace so he does not replace, just keeps the money.  Farm building has no basis, all depreciated out.  Client has to pay taxes on all $100,000.  Is there any way to recoup any of this.  Can the $100,000 be added to the farm building and depreciated.  If he had replaced the building and only spent the $100,000, there would be no tax, correct?  He did build another shed, but it had nothing to do with the hail damaged farm building.  any help here?

[rfassett]

There is nothing to add to the farm building.  The $100,000 would be used to replace or repair the building and then reduce basis in the building by the remainder.  Since he neither replaced, repaired nor has basis, it is all income to the farmer.

[TAXMAN]

I think the key word here is "neither repaired nor replaced" under the casualty rule farmer has nothing but income. my 2 cents worth.