Involuntary conversion
My principal residence burned down in January 2025 in a nationally declared wildfire disaster. My wife and I lived there for 30 years, so our cost basis is less than the insurance payout. We are almost done rebuilding the house, which is costing more than the insurance payout. My questions are: 1. Since it is our principal residence, do we need to file the casualty loss/gain form to report the insurance proceeds? 2. Since it is an involuntary conversion of our princiapl residence, do we even need to report the insurance payout? 3. How do we account for the cost of the rebuild, much of which has not been reimbursed by insurance? 4. We temporarily invested the insurance payout and received interest, so how do we minimize the interest on our taxes? Thank you.
