My main principal home was completely destroyed in Federally declared disaster (with a DR#) on 12/30/21.
My insurance proceeds( both received, and projected to the limits of the policy) will exceed the adjusted basis on the lost home by $194,000. So a gain was created as an involuntary conversion.
The IRC section 121 exclusion for a single owner is $250,000.
I have owned the home for the last 12 years.
I received no 1099s from my insurance company.
And have never taken the exclusion.
I just attempted to complete for 4684 in the disaster/Theft section of Deductions & Credits. But it appears that this is not necessary because the instructions say "If you exclude the gain and the entire gain is excludable, don't report the casualty on Form 4684."
So I deleted the property I listed from the 4684 form.
I believe this is correct. Is it?
My question is: How do you report the insurance proceeds Involuntary gain if I wish to use the 121 exclusion.
It is not a Home Sale.
I am rebuilding a replacement home on the same lot to be completed by 12/1/23 for a higher amount than my insurance proceed.
So I believe the best I can do is create and attach a separate clear note (with specifics) to the IRS explaining that my Insurance proceeds exceed my adjusted basis, but the gain is less than the section 121 exclusion.
I feel must report this is some way.
Does that approach work?
If so, it appears I must mail my 2022 return to the IRS with this addendum as Turbo tax does not allow pdf attachments. Correct?
Is there a way to file my return electronically with a proper accounting?
