In April, a tornado damages the house owned by Malik and John. The damaged residence required extensive repairs, making it necessary for Malik and John to move into a motel and eat their meals in restaurants. During the repair period they incur $1,200 for lodging at a motel, $800 for meals (their normal grocery costs would have been $220), and $150 for laundry services (Malik usually does the laundry, but the $150 includes $40 in dry cleaning costs they would have incurred if they hadn’t moved out of their residence). Included in the cost of the meals is $250 for lunches they normally would have incurred. They continue to make the $785 mortgage payment on their residence but their home utility expenses are only $80 (they normally would have paid $240 for utilities if they had occupied the residence). Their insurance company reimburses them $2,150 for the living expenses they incur while their residence is being repaired.

Required:

Determine the income tax treatment of the receipt of the $2,150 from the insurance company. Search a tax research database and find the relevant authority(ies) that forms the basis for your answer. Your answer should include the exact text of the authority(ies) and an explanation of the application of the authority to Malik and John’s facts. If there is any uncertainty about the validity of your answer, indicate the cause for the uncertainty.