Is the payout on a policy, rather than rebuilding the house, taxable? If the property is subsequently sold, is the total amount of the insurance payout, combined with the sale amount to determine the amount subject to capital gains tax?
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If you don't use the insurance proceeds to restore the property then you can look at the payout in terms of reducing the basis in the property - assuming this property is being held for personal use,
The property has been sold for an amount that is only a modest amount above its original purchase
How did you use the insurance proceeds?
If you did not use them to repair or replace damaged property, then you need to subtract those proceeds from your original cost basis - your purchase price.
Of course, much of the proceeds from the insurance will be used to replace items that were damaged, if not applied to the purchase of a new residence the majority of which in my case will be in the next year (2025). Are you suggesting that extensive item purchase records need be kept. Seems an impossible task, and one that can't possibly be determined in this taxable year 2024 to any significant degree.
Your opinion seems different than what I had been told
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