If your property is involuntarily converted, you might be able to: Get more time to replace it Defer paying tax on any gains Involuntary conversion (or involuntary exchange) is when you: Lose property to circumstances beyond your control—like theft, fire, disaster, government seizure (condemnation) Replace that property with other property or money—like an insurance payment or condemnation award Why request an extension You have a set time to replace the lost property. To determine the replacement period, use Casualties, Disasters and Thefts, Publication 547. If you can’t replace it within the replacement period, you can request more time if you can show a reasonable cause. For example, new construction won’t be finished within the replacement period. High market value and lack of available replacement properties aren’t reasons for an extension. How to request an extension You can request a replacement period extension of up to a year. What to include Cover sheet with: Attention: SB/SE Field Examination Area Director [Your State] Subject: 1033 Extension Request for Replacement Period of Involuntarily Converted Property Your name, title, phone number, and address Date If faxed, number of pages including cover sheet Explanation of why you need an extension with: Your name, address and taxpayer identification number Legal descriptions of the converted property Statement of action taken to replace the property Date the property was converted (or why it wasn’t replaced within the replacement period) Adjusted basis of the converted property Dates and amounts of payments you got Copy of tax return related to any deferred gains Ways to send it Send us your request 1 of these ways: Fax: 877-477-9193 Mail: Internal Revenue Service 985 Michigan Ave., Stop 16 Detroit, MI 48226 When to send it Aim to send your request to us before the replacement period ends. If you can’t, then send it soon after the period ends. In the request, tell us why you didn’t replace the property within its replacement period. Generally, you’ll hear from us near the end of the original or extended replacement period. Deferred gains If your reimbursement for the property is more than your adjusted basis, you’ll owe tax on the difference (taxable gain). You may be able to defer taxable gains. Check Sales and Other Dispositions of Assets, Publication 544. Related Involuntary conversions: Real estate tax tips Tax relief in disaster situations Disaster assistance and emergency relief for individuals and businesses Reconstructing records after a natural disaster or casualty loss Tax relief in disaster situations
