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home / study / business / accounting / accounting questions and answers / If A Company Experiences A Complete Loss Of An Office Building As A Result Of A Fire And Receives ... Question: If a company experiences a complete loss of an office building as a result of a fire and receives... If a company experiences a complete loss of an office building as a result of a fire and receives a $2 million recovery payment from the insurance company: Explain the tax consequences if the company decides not to rebuild.
Explanation / Answer
Explanation
No. Proceeds from insurance company on fire loss of Building is not taxable.
Principle of insurance is based on indemnification. It is not profit from insurance company. Tax is levied on profits and not on indemnification amount like insurance payment.
Even if we do not rebuild the property then still it is not required to be reported to IRS as long as there in no profit involved in the transaction.
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