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rather than being compelled simply to sell the damaged trees.6
Respondent contends that under section 1033 the realization
of gain must stem directly or solely from the damage and the
involuntary conversion. More particularly, respondent asserts
that petitioner’s conversion was not “involuntary” because
damaged trees were processed into end products in the ordinary
course of its business. Respondent points out that section 1033
is a relief provision which does not or should not include
petitioner’s situation; i.e., where the damaged trees are
processed in the same manner as undamaged trees. Finally,
respondent contends that section 1033 was not intended for the
long-term deferral of profits from petitioner’s timber processing
and manufacturing business.7
Petitioner argues that its factual situation complies
literally with the requirements of section 1033 allowing deferral
of gain realized from salvaging its damaged trees. Specifically,
6 The parties have isolated this issue from other unresolved
issues, including petitioner’s substantiation of the quantity and
value of the damaged trees; the amount of gain realized from sale
of damaged trees; the amount of gain that may be deferred; and
the determination of the correct year(s) for deferring the gain.
7 Respondent’s contention appears to address the possibility
that petitioner reinvested the proceeds (and deferred gains) from
the sale of the damaged trees in replacement property in the form
of relatively young trees, thereby resulting in lengthy deferral
of the subject gains. Respondent’s contention, however, is more
properly directed at the question of whether petitioner
reinvested the proceeds in qualified replacement property, a
question which is not at issue in the cross-motions for partial
summary judgment.
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