Are disaster relief funds received for cancellation of the 2008 Salmon fishing season taxable? I am aware that certain disaster relief funds that meet certain conditions can be non-taxable. In this case the funds are intended to replace lost income which I believe is taxable and also subject to self employment taxes.

The taxpayer called the IRS and was informed the funds are non-taxable. I told the taxpayer the IRS agent is wrong.

Any opinions on this matter?