The problem is we are guessing at details.
You need to divide the insurance proceeds into house and contents.
If you don't rebuild the house and don't buy a new home, that portion of the settlement is not taxable, but it reduces your cost basis. Then, when you sell the remaining property, you use the reduced cost basis to calculate your gain. If the payout is more than the cost basis, you have a capital gain. If this was your main residence, you can still exclude the first $250,000 from capital gains tax (or $500,000 if married filing jointly). See publication 523. If you do purchase a new home, you ignore the lost value and the insurance payout (they cancel each other out) and your new home keeps the basis of your original home.
Example 1: You bought the home for $250,000. The insurance payout for the fire was $200,000. The payout is not taxable but your basis is reduced to $50,000. You sell for $200,000. You have a capital gain of $150,000.
Example 2: You bought the home for $250,000. The insurance payout for the fire was $400,000. Your basis is reduced to zero and you have a capital gain on the payout of $150,000. Then you sell the remaining property for $250,000. You have an additional $250,000 capital gain. If you sell within 2 years of the loss, you can apply the $250,000 exclusion and only pay tax on $150,000 (or if married, apply the $500,000 exclusion and pay no capital gains tax.)
Example 3. You bought the home for $250,000. The insurance payout for the fire was $400,000. You sell the remaining property for $200,000 and you purchase a new home for $650,000. You have no taxable event to report, but your cost basis on the new home (used to calculate your capital gain whenever you sell it) is $250,000, and not $650,000.
As far as the contents are concerned, you do not have to report a capital gain, as long as you replace the items with "property that is similar or related in service or use to the [destroyed] property". Same as the house, the new items carry the cost basis of the old items, which may affect a gain or loss calculation when you dispose of those items.
Example 4: You estimate the contents of your house (furniture, TVs, computers, etc.) originally cost $20,000. The fair market value at the time (for used items) was $10,000. Because you have a replacement cost policy, the insurance company pays $50,000. You purchase similar items to replace the destroyed items. You don't report a gain, but the cost basis of the new items is treated as being $20,000 rather than $50,000.
See publication 523 and 544,
https://www.irs.gov/publications/p544
