Vector Inc.'s office building burns down on October 31,2015.Vector,a calendar year taxpayer,finally settles with the insurance company on February 3,2016.In order to defer the gain realized on the building,Vector must acquire another office building by February 3,2018.

Question

Quizplus · Accepted Answer

According to the rules for deferring gain on the involuntary conversion of a property, a taxpayer has 2 years after the end of the tax year in which the gain was realized to acquire a replacement property. In this case, the gain was realized in 2015 (assuming the insurance settlement was for more than the adjusted basis of the building), so Vector would have until December 31, 2017, to acquire a replacement property. February 3, 2018, is not within the allowed time frame.