If we lost our home and contents in a fire (declared as a disaster) but were fully reimbursed do we have to report the loss in order to explain the reimbursement?

[DDollar]

If you've suffered a loss in a natural disaster, and your insurance payment is greater than your basis, then in the eyes of the IRS you've enjoyed a (potentially) taxable gain. If your loss occurred in an area declared a federal disaster area, you can delay reporting the taxable gain by reinvesting the claim money in replacement property up to four years from the year you received the insurance settlement; that period is extended to five years in certain areas, such as those affected by Hurricane Katrina in 2005 and the Kansas tornadoes of 2007. The IRS will not tax any insurance proceeds received for damage or loss of "unscheduled" personal property such as furniture, books, jewelry, clothing and the like.

[lroberthill]

My sincere thanks to you, TurboTaxDavidD.  I suspected this was the case based on some research, but the downside of being wrong could have been catastrophic, so I am very grateful for your answer.

[DDollar]

You're very welcome.  I'm glad I could help.  Thanks for using TurboTax!!