Section 45(1A): Capital Gains on Insurance Claims for damage or destruction of Capital Assets.

Section 45(1A): Capital Gains on Insurance Claims for damage or destruction of Capital Assets.

• Where insurance claim is received in respect of capital asset damaged or destroyed, as a result of-

A.                  flood, typhoon, hurricane, cyclone, earthquake or convulsion of nature, or

B.                  riot or civil disturbance, or

C.                  accidental fire or explosion: or

D.                  action by an enemy or action taken in combating an enemy

• any money or
• the FMV of other assets received from insurance company shall be deemed to be sales consideration for computing capital gains.
• Capital gain shall be taxable in the year of receipt of insurance claim.
• If no claim is received on destruction of capital asset, no capital gain shall arise. The cost of the asset destroyed shall be capital loss i.e. dead loss which has no tax treatment.
• For the purposes computing the nature of capital gains, the date of transfer of the capital asset destroyed should mean the date of destruction.