If the Threat of Condemnation Exists and the Taxpayer Has
If the threat of condemnation exists and the taxpayer has reasonable grounds to believe that the property will be condemned,the taxpayer may elect to defer gain even if the taxpayer sells the property to a party other than the governmental unit that is threatening to condemn the property.
When the cost of replacement property is less than the amount realized on an involuntary conversion,gain will be recognized. The recognized gain will be equal to the amount realized over the cost of the replacement property,but not more than the total realized gain.
If property is involuntarily converted into similar property,the basis and holding period of the converted property carry over to the basis and holding period of the replacement property.
If the taxpayer elects to defer the gain on an involuntary conversion,the holding period of the replacement property begins on the date of purchase.