i have provided a link to form 4684 - the form is used to report gain/loss of casualties to business property including rental property
look at page 2 section B part 1 line 20
what's supposed to be entered there is the tax cost of the destroyed property reduced by the depreciation taken on it
you probably have no idea what these amounts are.
on 21 you report the insurance proceeds
22 can be a gain if insurance exceeds the depreciated cost from there unless you have other casualty losses, you now have taxable income
I would suggest that instead of reporting it this way. You reduce the $40K you spent by the $29 K insurance and depreciate the remaining $11K
https://www.irs.gov/pub/irs-pdf/f4684.pdf
