If you lose your home in a fire, the insurance (if any) will only reimburse you for the building.
However, I think you would still have a basis for the land.
If you sold soon after, you would get the Home Sale Exclusion (250,000/500,000) above the basis of the land.
If you purchased the property for 100,000 and the building was worth 95,000 while the land was worth 5,000, you could in theory sell the land for 505,000 and not need to claim the income if Married Filing Jointly.
There would be a time limit for selling the property and claiming the exception to capital gain, just as there is if you had a house and left it vacant.
@Caroleg22
@alyssaking92
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