Per the IRS:
"Property settlements for loss in value of property that are less than the adjusted basis of your property are not taxable and generally do not need to be reported on your tax return. However, you must reduce your basis in the property by the amount of the settlement."
https://www.irs.gov/pub/irs-pdf/p4345.pdf
As difficult as it may be, what this means is that you must place a Fair Market Value to the items that were damaged. This becomes the Basis of the property that was damaged. If you are able to do so documentation will be the key. If you can find documentation that is in a Public Forum on similar items that display a Fair Market Value, this should suffice.
Per the IRS:
"Property settlements for loss in value of property that are less than the adjusted basis of your property are not taxable and generally do not need to be reported on your tax return. However, you must reduce your basis in the property by the amount of the settlement."
https://www.irs.gov/pub/irs-pdf/p4345.pdf
As difficult as it may be, what this means is that you must place a Fair Market Value to the items that were damaged. This becomes the Basis of the property that was damaged. If you are able to do so documentation will be the key. If you can find documentation that is in a Public Forum on similar items that display a Fair Market Value, this should suffice.