Excess Casualty Reimbursement

[Edsel]

A client was rear-ended in her car.  FMV of car was $12,000.  Client is expecting insurance proceeds of $25,000.

Form 4684 has the provision for a casualty to result in taxable income.  I've just never seen this on an auto accident.  Need to get a straight answer as to how the client was able to cover a $12K asset with $25K in coverage.  Doesn't make sense.

When I get to the bottom of this, I expect the excess is to cover medical damage.  Only damage was a trip to clinic to check for whiplash.  Minor expense.

The way I look at this, there will be taxable income if the medical expense is what I expect it to be.

Comments?

 

[Elrod]

There may be a pain and suffering clause in policy.

[Catherine]

If not, I want to know what insurance company will over-pay on a claim!  (Their rates should be outrageous, or they'll go under.  Pick one - maybe both.)