I had an earthquake happen back in 1994, similar to a fire. Lot's of damage, a policy, a deductible, estimates and a pay out.
I had something called a casualty loss. Before the earthquake, my building was appraised for $420,000.
After the earthquake the value of the property, once fixed up, was now only valued at $300,000.
Since I'm a contractor I spent all but $40,000, left over money. Since I didn't charge myself for my own labor, that is where the extra $40,000 came.
The IRS tried to charge me for making a $40,000 profit. I laughed in their faces. I told them the property has a casualty loss of $120,000. According to the County Assessor, my figures were conservative. So instead of making $40,000 profit, I now had $80,000 loss.....
So I need not pay on the reserve funds due the my casualty loss. This would apply to a fire also... Work your numbers.
--47.155.xx.xxx