How to report postponed gain

[taxdan]

Client had total loss of res rental due to fire. He is replacing property with insurance proceeds, so we would like to postpone the gain that is generated from the dispostion of property due to the fire. (Replacement cost is greater than insurance proceeds)

The gain flows from the 4797 to the sch D, but I am not sure where to adjust the gain down to zero. A line item in part 2 of sch D perhaps?

I do know that I have to attach a statement detailing the situation.

Thanks for any help.

Dan