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I have a 1099-S and want to use Code Section 1033 to defer reporting gain

Forum|Forum|1 year ago
April 10, 2025
3 replies
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City, under threat of imminent domain, purchases residential real property and reimburses for trees and fence and landscape and issues a lump sum 1099-S . I want to defer gain under code section 1031 until purchase of trees and fencing when actual cost will be known. I believe I have 4 years to replace and determine amount that is capital gain.

What form do I use to report my intention to use 1031 in 2024 and what attachments are needed?

Is there a better way to do this? Thank you.

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Best answer by qbteachmt

https://www.law.cornell.edu/uscode/text/26/1033

"If the taxpayer during the period specified in subparagraph (B), for the purpose of replacing the property so converted, purchases other property similar or related in service or use to the property so converted,"

"The period referred to in subparagraph (A) shall be the period beginning with the date of the disposition of the converted property, or the earliest date of the threat or imminence of requisition or condemnation of the converted property, whichever is the earlier, and ending—

(i) 2 years after the close of the first taxable year in which any part of the gain upon the conversion is realized, or"

Pertinent parts. You can read the whole part at that link.

BobKamman

Level 15

Did the city actually buy the land outright, or just pay for an easement?

I

INGITAuthor

Level 3

BobK ~ City purchased land outright. Amount on 1099-S includes purchase price of land along with other stuff as result of negotiations in one lump sum

T

Terry53029

Intuit Community Champion

Do you mean section 1033 where you may be able to defer capital gains tax if you reinvest the proceeds into similar or related property. I believe you have 2 years, but can request an extension

BobKamman

Level 15

Section 1033 generally allows only two years, starting from the "earliest date of the threat". The 1099-S might be for just one amount, but other documents might have allocated payment to amounts that can't be reinvested. These eminent-domain cases are all so fact-specific, you just do the best you can.

I

INGITAuthor

Level 3

BobK - Thank you for your comments. As part of the negotiations w/city I got $5.5K (30%) more than city originally offered (attorney deemed it as 'to make me whole'). And as you mentioned there were 'amounts listed on other documents that couldn't be reinvested'.

Based on the potential tax reporting complexities and Occam's Razor I decided to pay the tax on the whole amount (less my basis). If I can purchase and plant trees, replace lawn and fence, within the allotted 1033 time frames and IRS rules I'll amend my tax return. The road is a 5 year project so it's unlikely I'll be able to take advantage of 1033 anyway. I think the city should have issued a 1099-S for the land involved and a 1099-whatever for the rest of it. Tedious.

I'd appreciate any further comments or suggestions as I may be running across this situation again as city pushes for infrastructure development to support housing. I was also interested in the source for 'earliest date of threat'. Best

qbteachmtAnswer

Level 15

https://www.law.cornell.edu/uscode/text/26/1033

"If the taxpayer during the period specified in subparagraph (B), for the purpose of replacing the property so converted, purchases other property similar or related in service or use to the property so converted,"

"The period referred to in subparagraph (A) shall be the period beginning with the date of the disposition of the converted property, or the earliest date of the threat or imminence of requisition or condemnation of the converted property, whichever is the earlier, and ending—

(i) 2 years after the close of the first taxable year in which any part of the gain upon the conversion is realized, or"

Pertinent parts. You can read the whole part at that link.

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