I'm not sure whether I will have a loss or a gain. I may not spend all the insurance money now and hold back the cost of completely redoing the floor but I expect that will be reflected either in a lower selling price of the home (reduced taxable gain) or in the cost of redoing the floors at that time. Setting aside the floors, the cost of the replacement property and the service cost to do the work I do will probably exceed the insurance reimbursement for that portion of the repair because of higher quality materials used and, again, that I expect to be reflected as a positive factor when the home is sold (increased taxable gain on the sale). But a lot of this is speculation right now.
My inclination is to accept the conclusion of the restoration company and the insurance company that the insurance payment is cash that is equivalent in value to "property that is similar or related to it in service or use", regardless of whether I spend all the money now or at the time of sale in a few years (if I don't spend it to do all the repairs now and sell the house "as is", I would expect to get a lower selling price approximately equivalent to the insurance money not spent so it would only be a temporary gain).
Right?
