Robert J. and Anne L. Wilson - Page 15

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               Respondent determined that gain realized on the condemnation           
          of the DeSellum property did not qualify for nonrecognition under           
          section 1033 because qualified replacement property was not                 
          purchased within the statutory replacement period.  Petitioners             
          assert that the Bath Co. property was qualified replacement                 
          property that was purchased within the statutory replacement                
               Respondent concedes that petitioners' DeSellum property was            
          real property held for productive use in a trade or business;               
          accordingly, the 3-year replacement period applies to                       
          petitioners.  Sec. 1033(g)(4).  To resolve the issue of whether             
          qualified replacement property was timely acquired, we must                 
          determine when the 3-year replacement period began and ended.               
               Pursuant to section 1033(a)(2)(B), the 3-year replacement              
          period begins "with the date of the disposition of the converted            
          property, or the earliest date of the threat or imminence of                
          requisition or condemnation of the converted property, whichever            
          is the earlier".  Section 1033(a)(2)(E) defines "disposition of             
          the converted property" to mean, inter alia, the "condemnation of           
          the converted property * * *."  Whether there has been a                    
          condemnation for Federal tax law purposes depends on the                    
          substantive rights arising under State law.  Dear Publication &             
          Radio, Inc. v. Commissioner, 31 T.C. 1168, 1174 (1959), affd. 274           
          F.2d 656 (3d Cir. 1960); see Morgan v. Commissioner, 309 U.S. 78,           
          81 (1940).                                                                  

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