William T. Shipes, Jr. and Kathy D. Shipes - Page 7

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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                

          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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