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investigation until 2 weeks before he pleaded guilty. In
settlement of the RTC's claims, Mr. Acquaviva and his sons paid
$7,825,000 in 1993. This payment was partially funded by
borrowing and was secured by the family's remaining assets which
included the Acquavivas' home.
1. 1985 Involuntary Conversion
Mr. Acquaviva purchased a multistory commercial building
located in Hoboken, New Jersey (Hoboken property), in 1973. The
Hoboken property was destroyed by fire in January 1985. Mr.
Acquaviva received $1 million from his insurance carrier in late
1985 as a settlement of the damage caused by the fire. At the
time of the fire, Mr. Acquaviva's adjusted basis in the Hoboken
property was $806,464. On the Acquavivas' 1985 Federal income
tax return, Mr. Acquaviva did not report any gain from this
conversion, electing instead to defer the gain pursuant to
section 1033.4 No statement was attached to the couple's 1987
4 Sec. 1033 provides that, under certain circumstances, a
taxpayer may defer the taxation of gain realized on an
involuntary conversion. Sec. 1033(a)(1). Where condemnation
proceeds are received in the form of money, replacement with
like-kind property must be made within 2 years after the close of
the year in which the landowner first receives the proceeds, in
this case, by the end of the calendar year 1987. The
Commissioner's regulations direct that the details of an
involuntary conversion of property resulting in a gain should be
reported on the return for the year in which the gain is realized
(in this case 1985) but that an election to defer recognition of
gain will be deemed to have been made by a failure to include the
gain in gross income in the year received. Sec. 1.1033(a)-
2(c)(2), Income Tax Regs. The failure of the Acquavivas to
report and pay tax on the gain from the involuntary conversion on
(continued...)
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