The IRS says that if your property isn't completely destroyed, your casualty loss amount is the lesser of your adjusted basis in the property or the reduction in fair market value of the property.
So for cost basis, you would use the cost basis of the entire property. and for the reduction in FMV you would use the $12K in damages, as DawnC explained. You don't have to figure the cost basis for the parts of the home that were damaged.
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