Involuntary Conversion: Get More Time To Replace Property

If your property is involuntarily converted, you might be able to:

Involuntary conversion (or involuntary exchange) is when you:

• Lose property to circumstances beyond your control-like theft, fire, disaster, government seizure (condemnation)
• Replace that property with other property or money-like an insurance payment or condemnation award

Why request an extension

You have a set time to replace the lost property. To determine the replacement period, use Casualties, Disasters and Thefts, Publication 547.

If you can't replace it within the replacement period, you can request more time if you can show a reasonable cause. For example, new construction won't be finished within the replacement period.

High market value and lack of available replacement properties aren't reasons for an extension.

How to request an extension

You can request a replacement period extension of up to a year.

What to include

Cover sheet with:

• Attention: SB/SE Field Examination Area Director [Your State]
• Subject: 1033 Extension Request for Replacement Period of Involuntarily Converted Property
• Your name, title, phone number, and address
• Date
• If faxed, number of pages including cover sheet

Explanation of why you need an extension with:

• Your name, address and taxpayer identification number
• Legal descriptions of the converted property
• Statement of action taken to replace the property
• Date the property was converted (or why it wasn't replaced within the replacement period)
• Adjusted basis of the converted property
• Dates and amounts of payments you got
• Copy of tax return related to any deferred gains

Ways to send it

Send us your request 1 of these ways:

• Fax: 877-477-9193
• Mail:
  Internal Revenue Service
  985 Michigan Ave., Stop 16
  Detroit, MI 48226

When to send it

Aim to send your request to us before the replacement period ends.

If you can't, then send it soon after the period ends. In the request, tell us why you didn't replace the property within its replacement period.

Generally, you'll hear from us near the end of the original or extended replacement period.

Deferred gains

If your reimbursement for the property is more than your adjusted basis, you'll owe tax on the difference (taxable gain).

You may be able to defer taxable gains. Check Sales and Other Dispositions of Assets, Publication 544.

Related

Involuntary conversions: Real estate tax tips
Tax relief in disaster situations
Disaster assistance and emergency relief for individuals and businesses
Reconstructing records after a natural disaster or casualty loss
Tax relief in disaster situations

Public link

Please use the above public link if you want to share this noodl on another website.