Vector Inc.'s office building burns down on October 31,2014. Vector,a calendar year taxpayer,finally settles with the insurance company on February 3,2015. In order to defer the gain realized on the building,Vector must acquire another office building by February 3,2017.
When an involuntary conversion is due to the condemnation of real property held for productive use in a trade or business or for investment,the replacement period will end three years after the close of the first tax year in which any part of the gain is realized.
A loss on the sale of a taxpayer's personal residence is deductible if the taxpayer owned and lived in the home for two of five years.
In order for the gain on the sale of a personal residence to be excluded under Section 121,a replacement residence must be purchased within two years.