Dennis, a calendar year taxpayer, owns a warehouse (adjusted basis of $190,000) that is destroyed by a tornado in October 2019.He receives insurance proceeds of $250,000 in January 2020.If before 2022, Dennis replaces the warehouse with another warehouse costing at least $250,000, he can elect to postpone the recognition of any realized gain.

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This is known as the involuntary conversion rule under Section 1033 of the tax code. If Dennis replaces the warehouse within a certain time frame and meets certain requirements, he can defer the recognition of any gain realized from the destruction of the original warehouse.

Dennis, a Calendar Year Taxpayer, Owns a Warehouse (Adjusted Basis