TAX LAW
Project description
<Example>
Fire damaged the personal residence of George Hesteria. Because of the fire, George could not occupy his residence for six months.
George resided in a hotel incurring $18,000 of lodging costs. Since the hotel did not have cooking facilities, George incurred meal expenses from eating in restaurants. During the six- month period, he spent $7,500 for food. George’s homeowner’s insurance policy will reimburse $36,000. George estimates that his normal monthly food expense while living in his house is $800/month.
George continues to incur all of his other normal housing costs (home mortgage interest, property taxes, insurance, and utilities). During the six months that he was absent from his residence, his total cost for home mortgage interest, property taxes, and insurance was $30,000. He paid $650 for utilities during this six month period. His normal utilities for six months would be $1,200.
<Question>
Based on the receipt of the $36,000 INSUANCE REIMBURSEMENT, HOW MUCH GROSS INCOME MUST GEORGE HESTERIA REPORT?
? This memorandum should include documentation of the facts (see above) and identification of the issue or issues and a complete but precise legal analysis applying the law to the given facts with precise legal citations supporting a direct answer for each question. The answers must be based on precise language of the SEC123
SEC. 123
AMOUNTS RECEIVED UNDER INSURANCE CONTRACTS FOR CERTAIN LIVING EXPESES.
SEC. 123 (a)
(a) General Rule – In the case of an individual whose principal residence is damaged or destroyed by fire, storm, or other casualty, or who is denied access to his principal residence by governmental authorities because of the occurrence or thereat of occurrence of such a casualty, gross income does not included amounts received by such individual under an insurance contract which are paid to compensate or reimburse such individual for living expenses incurred for himself and members of his household resulting from the loss of use or occupancy of such residence.
SEC. 123 (b)
(b) Limitation – Subsection (a) shall apply to amounts received by the taxpayer for living expenses incurred during any period only to the extent the amounts received do not exceed the amount by which –
(1) The actual living expenses incurred during such period for himself and members of this household resulting from the loss of use or occupancy of their residence, exceed
(2) The normal living expenses which would have been incurred for himself and members of his household during such period.
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