- 17 -
to salvage (sell or use) the damaged trees. The damaged trees
were used in their businesses, but not in the same manner as they
would normally have done. In the 1980 ruling, the taxpayer was
forced to sell the trees under unintended business conditions.
Likewise, petitioner was forced to use the damaged trees, albeit
in its manufacturing process, under unintended business
conditions; i.e. before maturity and/or before the time at which
the trees would normally be ready for efficient harvest.
Respondent also argues that petitioner is not entitled to
defer gain because “there were no actual sales of damaged
timber.” Respondent argues that section 1033 requires a sale or
conversion of the damaged property into money or property similar
in use to the damaged property. Section 1033 simply requires
that property be involuntarily converted into money or property.
There is no requirement, as argued by respondent, that the
deferred gain be derived in a particular manner; i.e., only from
a distress sale. Based on the holding of Rev. Rul. 80-175, 1980-
2 C.B. 230, it is unlikely that respondent would have questioned
the deferral of gain if petitioner had been forced to sell the
damaged trees in place.12
12 If we were to approve respondent’s approach, taxpayers,
who were unable to sell damaged assets without some additional
processing would be denied sec. 1033 relief. That distinction
could not have been intended and certainly was not expressed in
the legislation.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011