I read that if the insurance reimbursement is greater than the adjusted basis of the property, then the excess could be taxable even if you use the entire amount of the reimbursement for repairs. For example, I bought the house for $150,000 30 years ago. The damage to repair is $250,000. The insurance reimburses me for $300,000 and I put the entire amount into the restoration of the house.
For simple math, does the IRS consider my adjusted basis to be $150K so the excess of $100,000 is taxable gain?
This is the part I'm stuck on.
