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deferral of gain from the sale of damaged trees. The factual
predicate for both rulings was as follows:
the taxpayer was the owner of timberland. As a result
of a hurricane, a considerable number of trees were
uprooted. The timber was not insured, and once downed,
was subject to decay or being rendered totally
worthless by insects within a relatively short period
of time. The taxpayer was, however, able to sell the
damaged timber and realized a gain from such sale. The
proceeds of the sale were used to purchase other
standing timber.
The rationale articulated in Rev. Rul. 80-175, supra, is
that gain is “postponed on the theory that the taxpayer was
compelled to dispose of property and had no economic choice in
the matter” and that the taxpayer “was compelled by the
destruction of the timber to sell it for whatever the taxpayer
could or suffer a total loss.” Id., 1980-2 C.B. at 231.
Accordingly, the taxpayer in the 1980 ruling was found to have
met the two part test; i.e., that the damage was involuntary and
the timber was no longer available for the taxpayer’s intended
business purpose. Most significantly, the 1980 ruling eliminated
the requirement that the damage-causing event convert the
property directly into cash or other property.
The 1980 ruling also contained a comparison with the holding
in C.G. Willis, Inc. v. Commissioner, supra, as follows:
In the present case, the downed timber was not
repairable and was generally no longer useful to the
taxpayer in the context of its original objective. The
destruction caused by the hurricane forced the taxpayer
to sell the downed timber for whatever price it could
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