Section 1033 Exchange

The amendment made by this section amending this section shall apply with respect to any disposition of converted property within the meaning of section 1033 a 2 of the internal revenue code of 1986 formerly i r c.

Section 1033 exchange. What is an involuntary conversion. 1 this is commonly referred to as an involuntary conversion since the loss of property is beyond the control of the taxpayer. Condemnation and involuntary conversions.

1954 after december 31 1974 unless a condemnation proceeding with respect to such property began before the date of. A section 1033 eminent domain and a section 1031 exchange achieve the same outcome of deferring capital gain taxes when selling real property but one is far less restrictive than the other. Originally placed in the tax code in 1921 internal revenue code section 1033 governs the tax consequences when a property is compulsorily or involuntarily converted in whole or in part into cash or other property.

It is possible however to defer paying tax on the gain by doing a 1033 exchange. Internal revenue code section 1033 provides that gain that is realized from an involuntary conversion can be deferred if the owner acquires replacement property that is similar to the property that was lost. Here are the answers to your 1033 exchange frequently asked questions.

Under section 1033 an involuntary conversion is defined as a destruction or loss of the property through casualty theft or condemnation action pursuant to government powers of eminent domain and the resulting compensation from such destruction or condemnation.