In October 2016, fire completely destroys the principal residence of Olaf, who is 63 and single, and lives in Bemidji, Minnesota. He owned the home for 16 years; his adjusted basis is $58,000. Olaf receives insurance proceeds of $200,000.
Olaf plans to move to Scottsdale, Arizona to be near his daughter no later than 2018, when she plans to return there after finishing a five-year tour of duty with the U.S. Foreign Service. Olaf also owns a condominium in Hilton Head, South Carolina, which he paid $120,000 for in February 2015. Write a letter to Olaf advising him on his options and their tax consequences.