T11F-Chp-12-5B-Involuntary Conversion-Section 1033

T11F-Chp-12-5B-Involuntary Conversion-Section 1033 - Problem

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Problem 9e1972bd0279a1ce2fdb2876124eee6e8efb2860.xls Involuntary Conversions under Section 1033. Property taken by city under eminent domain. Or property is destroyed by fire and is covered by insurance. Deferral of Gain: Section 1033(a)(2)(A). Basis of New Asset: Section 1033(b). Good Basis Examples: Reg. 1.1033(b)-1 Deferral under Section 1033 applies only to Gains [not Losses]. Deferral under Section 1033 must be elected - it is optional. Sec. 1033 is not applicable to losses. They are deductible under Section 165. Under Sec. 1033, Gain Realized is recognized to extent proceeds from conversion [insurance, government payments, etc.] are not spent on replacement property. [Reg. 1.1033(a)-2(c)] Gain recognized cannot exceed gain realized Gain realized, but not recognized is referred to as "Deferred Gain." Basis of replacement property is its cost, less deferred gain. [Reg. 1.1033(b)-1(b)] Basis FMV Cost of Proceeds Gain Gain Gain Basis of of Old of Old Cash new Not (loss) (loss) (loss)
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T11F-Chp-12-5B-Involuntary Conversion-Section 1033 - Problem

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