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Section 1033(a)(2)(B) clearly states the law as follows:
The * * * [replacement period] shall be the period
beginning 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, and
ending --
(i) 2 years after the close of the
first taxable year in which any
part of the gain upon the
conversion is realized, or
(ii) subject to such terms and
conditions as may be specified by
the Secretary, at the close of such
later date as the Secretary may
designate on application by the
taxpayer. Such application shall be
made at such time and in such
manner as the Secretary may by
regulations prescribe. [Emphasis added.]
It is clear from the text of the statute above that in the
absence of an extension by the IRS, the opportunity for deferral
is lost when the replacement period runs beyond 2 years after the
close of the first taxable year during which conversion gain is
realized. See Stewart & Co. v. Commissioner, 57 T.C. 122 (1971);
Feinberg v. Commissioner, 45 T.C. 635 (1966), affd. 377 F.2d 21
(8th Cir. 1967); see also Conlorez Corp. v. Commissioner, supra.
It is irrelevant that a taxpayer may receive a portion of his or
her condemnation award long after the replacement period has
4(...continued)
property was not purchased within 2 years following the close of
that taxable year, and because the taxpayer did not apply for an
extension of time to replace the condemned property, the taxpayer
did not qualify for nonrecognition of gain under sec. 1033.
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Last modified: May 25, 2011