This actually results in a fairly complicated math problem so buckle up, @jasonrust.
Technically, when the old building burned down the new rebuild becomes a new asset. So you need to sell the old asset at a loss (received $0 in the sale) and create a new asset. The creation of the new asset is the weird part.
You need to add up the cost of the land from the original asset (the non-depreciable portion of the asset) plus the cost of the rebuild (which includes the portion of the rebuild paid for by the insurance) plus the accumulated depreciation from the original asset (how much you had depreciated the building up until the fire). The total of these is the new asset with an put-in-service date of the date of the completion of construction.
Also, keep in mind that any rent that was paid by the insurance company is income for the year in which it was paid and should be entered as such.
Here's some more information and an example.
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
