Grantly Seafood is a calendar year taxpayer.In 2017,a hurricane destroyed three of Grantly's fishing boats with a $784,500 aggregate adjusted tax basis.On October 12,2017,Grantly received a $1.2 million reimbursement from its insurance company.What is the latest date that Grantly can replace the boats to avoid gain recognition from the involuntary conversion?

Question

Quizplus · Accepted Answer

According to the rules of Section 1033 of the Internal Revenue Code, the taxpayer has two years from the end of the tax year in which the involuntary conversion occurred to replace the damaged property. Since Grantly is a calendar year taxpayer and the hurricane occurred in 2017, the latest date that Grantly can replace the boats to avoid gain recognition is December 31, 2019 (which is two years after the end of the 2017 tax year). Therefore, the correct choice is C.

Grantly Seafood Is a Calendar Year Taxpayer