Palisades fire questions the

[changelives2]

Hi,

We lost our home of 27 years in the Palisades Fire.  We bought our house for 950,000 and have $450,000 of improvement.  We expect to get 1.5 million on from the insurance company - even though we have a construction engineer determination of a $2,100,000 rebuild cost.  

We are not rebuilding and are considering selling the land for $2,000,000.  

 In calculating LT capital gains, do I count the insurance reimbursement and the proceeds from the land sale as my sale price ($3,400,000) , or or just the land sale above less our home adjusted basisi, ($2,000,000) - less the one time $500,000 deduction I am 65)?

Thanks

[MaryK4]

No, the sales price will be the $2,000,000.  Your basis will be the $1,500,000 so with the exclusion you would have no gain on the sale.  (The insurance proceeds essentially made you whole on what you had in the house that was lost.)