As a result of a fire damaging their residence, the Taylors must stay in a motel for three weeks while their home is being restored. They pay $2,000 for the room and $500 for meals. Their homeowner’s policy pays $2,500 to reimburse them for the cost. They estimate that during the five-week period they would normally spend $300 for meals. Is the reimbursement taxable?
A partial list of research sources is
• Sec. 123
• Reg. Sec. 1.123-1