- This topic has 2 replies, 2 voices, and was last updated 4 years ago by
.
- Posts
When a company has a damaged asset and receives insurance money for the part disposal, the treatment is specified in the notes as-
“if the insurance money is fully used in restoring the asset the tax payer can elect to have the
proceeds deducted from the cost of the asset for a future calculation thereby deferring any gain
when the insurance is received”Could someone help me understand how the deferment happens when the insurance is received, and when is the chargeability deferred to? Will the insurance receipt be charged at a later point in time?
Thanks in advance!
Lets say that 6 months after the damage, the asset was disposed of. The BASE COST will be calculated as follows:
Cost xxxx
Add: Restoration expenditure xxxx
Less: Insurance proceeds (xxxx)
Base cost = xxxxThis base cost will be used for gain calculation.
Hope this helps.
- You must be logged in to reply to this topic.