Dennis,a calendar year taxpayer,owns a warehouse (adjusted basis of $190,000) which is destroyed by a tornado in October 2015.He receives insurance proceeds of $250,000 in January 2016.If before 2019,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 Internal Revenue Code. If Dennis replaces his warehouse with a property of similar use and cost within a certain time period, he can elect to defer the recognition of any realized gain from the destroyed property.

Dennis,a Calendar Year Taxpayer,owns a Warehouse (Adjusted Basis of $190,000)