Robert J. and Anne L. Wilson - Page 17

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          application for extension must be filed prior to the expiration             
          of 3 years after the close of the first taxable year in which any           
          part of the gain from the conversion is realized.  Sec.                     
          1.1033(a)-2(c)(3), Income Tax Regs.                                         
               Petitioners have stipulated that they did not ask the IRS              
          for an extension of time in which to buy replacement property               
          pursuant to section 1033.  Accordingly, we must determine whether           
          petitioners purchased replacement property within 3 years after             
          the close of the first taxable year in which any part of the gain           
          upon the conversion was realized.  Sec. 1033(a)(2)(B)(i).  The              
          key to resolving this issue is the date on which gain was                   
          realized, if at all, on the conversion of the petitioners'                  
               On June 5, 1980, the State deposited $28,400 with the                  
          circuit court as compensation to petitioners for condemnation of            
          their property.  The condemnation actually occurred on June 16,             
          1980, and, on June 24, 1980, petitioners withdrew the $28,400               
          deposit.  Despite withdrawing these funds in 1980, petitioners              
          argue that no amount was realized until 1989, when the amount of            
          compensation that they were entitled to receive as a result of              
          the condemnation was finally determined.  We have previously                
          addressed this argument in the context of condemnation deposits,            
          and it is well settled that, under the claim of right doctrine,             
          such amounts are realized to the taxpayer in the year received              
          even though at the time of receipt conditions exist which might             

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