If your property is involuntarily converted, you might be able to:
- Get more time to replace it
- Defer paying tax on any gains
Involuntary conversion (or involuntary exchange) is when you:
- Lose property to circumstances beyond your control¡ªlike theft, fire, disaster, government seizure (condemnation)
- Replace that property with other property or money¡ªlike 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