Hypothetical but relevant for friends whose home was just burned to the ground in the Pacific Palisades fire, which is still burning.
Let’s say they purchased the home years ago for $500,000. Before the fire the home was worth $3,000,000. If they had sold, they would owe capital gains taxes on $2,000,000, taking into consideration the $500,000 exclusion for owner occupied home.
Now let’s say they get a check for $1,000,000 from their insurance company and sell the lot for $2,000,000. Will they only owe capital gains taxes on $1,000,000? Or do they have to recognize some of their insurance check as capital gains?
Let’s say they purchased the home years ago for $500,000. Before the fire the home was worth $3,000,000. If they had sold, they would owe capital gains taxes on $2,000,000, taking into consideration the $500,000 exclusion for owner occupied home.
Now let’s say they get a check for $1,000,000 from their insurance company and sell the lot for $2,000,000. Will they only owe capital gains taxes on $1,000,000? Or do they have to recognize some of their insurance check as capital gains?
Statistics: Posted by cadreamer2015 — Wed Jan 08, 2025 1:57 pm — Replies 1 — Views 99