If the structure burned down, we received insurance payment and then sold the land, where do I report the sale of the land?
Is it okay to add in the unclaimed depreciation of the structure into the cost basis of the land for the purpose of the sale?
It depends on how you're reporting the casualty loss and insurance proceeds.
Basically, the insurance payout is reported as rental income. Yes, it's reportable and "potentially" taxable income. That's because you got to deduct the insurance premiums you paid in the past. Therefore, any payout of that policy is reportable on your tax return. Now I'm assuming you know and understand this, and that you also are aware of and understand quite a bit more, which I"m not going into here. So I'm only going to address your question.
If you declared the loss in the Casualty/Thefts section under the Deductions and Credits tab ***AND*** you heeded the guidance in the "learn more" links in that section and reduced your cost basis of the loss (that would be the cost of the structure only) by the amount of depreciation already taken, then the remaining depreciation you have not yet taken gets added to the cost basis of the land. Depending on the amount we're talking about here, it "may" offset the taxability of the insurance payout, or a portion of that payout. It's also perfectly feasible that your sale when combined with the insurance payout (or taxable portion thereof) you will actually show an overall gain on the disposition of the property.
