Question for tax accountants?

Question

I'm an accounting student and I was thinking about this the other day and our text does not cover this. Do you have to report insurance money as taxable? That is if you are in an auto accident and your insurance company sends you a check do you have to report that in income or some other area, or is it exempt? My other question is if you take the insurance money's recieved and loan it to someone and they cannot pay you back can you still claim for a nonbuisness bad debt deduction and deduct the 3,000 a year until it is absorbed?

Answer 1

Think of it this way, insurance settlements arre usually reimbursements for money that you have already spent repairing or replacing items that were damaged, lost or stolen. Usually this money is not taxable. If however you sue an insurance company and receive money above and beyond what it cost to repair or replace property, i.e. punitive damages, the amount in punitive damages would be taxable.

If you receive money and loan it to someone else, it is assumed to be your money of which you can do whatever you want you may claim it as a nonbusiness bad debt deduction. However in order to deduct it off your taxes - you woud have to 1099 the borrower for the forgiveness of the debt. This person would then add that amount that amount as ataxable income to thier return.

Answer 2

a cost accountant in many circumstances analyzes the fee of something to how plenty it particularly is offered for. A tax accountant does taxes, and an accountant does very just about each little thing to do with accounting, including fee and tax.

Answer 3

I basically agree with the first answer. I might nickle and dime it a bit, but it's good enough for Yahoo.

Answer 4

Add me as agreeing with the first two answers.