You can use the $1200 as the Cost Basis for this event. The FMV before the casualty was $1200; after the casualty, $0.
If you received insurance reimbursement, that will be subtracted from the $1200.
Basically you are trying to claim the amount you paid out of pocket (or your deductible).
Here's more info:
https://ttlc.intuit.com/replies/6395931
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