No. This is a bit more complex than you may realize. The fire is a casualty event. The loss you suffer from that event is a deductible loss on your tax return for the year in which the fire occurred. The initial amount of the loss is the lesser of:
(1) your adjusted basis in the home at the time of the fire or
(2) the decrease in the value of the home as a result of the fire.
So, for example, suppose the home was worth $225,000 at the time of the fire and your basis in the home was $175,000. After the fire, the home value is now only $150,000. The decrease in value as a result of the fire is $75,000. Since that $75,000 is less than your adjusted basis of $175,000 your initial casualty loss is $75,000. You then reduce that loss by the amount of the insurance you received. If your insurer paid you $70,000 then your casualty loss is $5,000. You may deduct that $5,000 loss on your return. If, on the other hand, the insurance paid $85,000, then there is no deductible casualty loss because the insurance reimbursement is more than the loss you had. (If the reimbursement had exceeded your adjusted basis then there would have been a gain realized, but we don't have that situation in this example.)
What then is the effect of all this on the basis of your home after the fire? Well, your basis is reduced by the total of (1) any deductible casualty loss you took plus (2) the insurance proceeds that you received. So, let's take the example I had above where you had the initial casualty loss of $75,000 and insurance reimbursement of $70,000, leaving you with a deductible casualty loss of $5,000. You then reduce your basis in the home by the total of the $5,000 deductible loss and the $70,000 insurance reimbursement, for a total basis reduction of $75,000. These means that the basis of $175,000 that you had before the fire is now reduced to $100,000.
In the example of the insurance reimbursement of $85,000, there is no deductible casualty loss so you just reduce the basis by the amount of the reimbursement, i.e. the basis is reduced by $85,000 to $90,000.
Then you increase your basis by the amount you spend to make to restore/improve the property. So let's say in my first example of the $70,000 insurance reimbursement you end up spending $100,000 to restore and improve the property, using the $70,000 insurance money and adding to that $30,000 of your own. Since the basis was reduced to $100,000 after the casualty event, this means you ends up with $200,0000 in basis after the repairs/improvements are done.
You can see the effect here: if you spend at least what the insurance reimbursement was and that reimbursement at least equals your casualty loss then the insurance has no effect on your basis and you simply increase your basis by the amount of what you spend to restore/improve the place that exceeds the insurance reimbursement.
It's important to walk through each of the steps here to reach the right result when you are not experienced with how this plays out. Some tax preparers will simply jump to the bottom line effect that I mentioned in the previous paragraph without going through the full analysis. And while that works for a lot of situations, it doesn't work for all of them. There can be situations in which there is more going on than just that simple short cut. I've seen mistakes made by preparers (typically less experienced ones) who simply apply that short cut and don't go through the full analysis. You have to know when the short cut works and which situations require walking through each step.