Our investment property burned down! So many questions...

[Levi Lais]

First, I'll lay out the facts and then I'll follow that with the questions...

The Scenario

1. We purchased a house for $467K as an investment property in January, 2022 (the 3rd in our portfolio and in no way would be confused with a primary residence). The land value according to the assessor was $197,500 at the time of purchase. Our plan is to convert a SFA into a "Monster House" - convert the basement and the detached garage into an attached and a detached ADU.
2. We Invested approx. $20K into capital improvements. (about $5K of that going to the detached garage a basement - including permits)
3. Then the house burns down in February 2022 (not touching the garage, so we can keep working on the garage).  The adjusters and investigators do their thing and the max insurance payout of $665K to fully rebuild (all but 1 wall) is expected to be hit.
4. The house projects to finish being rebuilt in May, 2023 (this is when it's projected to be done)
5. Note that no renters have occupied the house as we were about 2 weeks away from posting it.  Thus, no "lost rent" payouts have been made and no "in service" timelines have been hit.
6. The detached ADU will likely incur an additional $100K and be completed this fall
7. The attached ADU will likely incur an additional $50K and will now be completed in early 2024.
8. As a bit of a summary - I have figured a pre-fire basis of approx. $249.5K, $15K of that was lost to the fire, the home was replaced by a $665K rebuild* paid for by insurance, and $150K or so in additional investments that pre-date and will post-date the fire will go towards the 2 ADUs.

My Questions

1. How is basis/depreciation handled in this scenario?  Does the amount that the insurance company is paying to rebuild* the house count towards the basis?  
2. Do we have to pay taxes on the insurance payout?
3. What's th best practice for writing off larger ADU-type capital expenses?  Do we wait until the ADU is put into service in order to start the 27.5 year depreciation on those improvements even tho they partially pre-date the fire?
4. Can we (and if so, how can we) write off the $30K+ that we've burned in carrying costs on mortgage/HELOC taxes/interest

[Linda Weygant]

This is a highly nuanced set of facts/circumstances and it'd be difficult/impossible to answer without a full dynamic discussion.  The answer to almost every question is "It Depends"

If your CPA has experience in real estate issues as well as casualty losses, they should be able to discuss and explain all of these things to you.  

Because the answers to some of these questions is dependent on your personal set of facts and circumstances, the only person who is going to be able to answer this is your tax professional.

Crowd sourcing this type of nuanced and difficult area of tax law probably won't be a great idea.  Even if you had each person who experienced such a situation come and answer, many of them will have different results and answers based on their own specific set of facts and circumstances.  In my opinion, filling your head with all the POSSIBLE answers is not nearly as helpful as getting the answers associated with YOUR situation.