Rental property fire-total loss

[EydieG]

Last year we had a rental property burn totally down.  The insurance paid us more that our original cost however not enough to rebuild in todays economy, so we sold the land as is. We don't plan on purchasing a replacement property at this time either because of soaring prices.  What part of this insurance payout is taxable? We received a 1099 from the insurance company for the portion that was dedicated to loss of rents but not for the total amount. 

[ColeenD3]

I'll take your questions one by one. Lines 20, 21 and 22 on Form 4684 indicate that any amount received over the basis of the property is taxable.

The sale is a stand-alone issue and the gain, if any, is taxable. If there was a loss, it is deductible since, it was business property.

The reimbursement for the lost rent is also taxable, since it would have been taxable is it had been rent collected from a tenant.

[Carl]

What part of this insurance payout is taxable?

That's to be determined.

Understand that the insurance company only insures the structure, not the land. So what you're calling a total loss, is not a total loss "to you". You still own the land.

Basically, with the insurance payout you sold the structure to the insurance company. Any gains on that are taxable. Any part of the payout that was specifically designated for rent, is exactly that and gets reported as rental income.  The remainder of the payout is your sale price for the structure.

Then you sold the land to another. Any gains on that are taxable.