Yes, you increase the cost basis by the amount you spent to restore the property ($95k per your words) as instructed. Per the instructions you printed above from IRS Publication 547:
- Adjustments to Basis
If you have a casualty or theft loss, you must decrease your basis in the property by any insurance or other reimbursement you receive and by any deductible loss. The result is your adjusted basis in the property. If you make either of the basis adjustments described above, amounts you spend on repairs that restore the property to its pre-casualty condition increase your adjusted basis.
You have reported the gain following the instructions provided by our awesome Tax Expert @AmyC. This is why you can now increase your basis by the amounts you spend to restore the property back to the pre-casualty condition.
@Dengland37
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