With respect to a 1033 election made by a taxpayer to defer the gain on involuntarily converted property in a federally declared disaster area (Camp Fire), is the replacement period for business use assets 2 or 3 years? Per section 1033(g)(4), it appears as if the replacement period is 3 years but the Disaster Losses literature compiled by Spidell indicates a 2 year replacement period, with an option for an extension to be applied for. Can you please clarify?
<span class=”num bold”>(B)</span><span class=”heading bold”> Period within which property must be replaced t</span><span class=”chapeau”>he 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—</span>
<div class=”clause indent3″><span class=”num”>(i)</span>
<div class=”content”>2 years after the close of the first taxable year in which any part of the gain upon the conversion is realized, or</div>
<div class=”clause indent3″><span class=”num”>(ii)</span>
<div class=”content”>subject to such terms and conditions as may be specified by the Secretary, at the close of such later date as the Secretary may designate on application by the taxpayer. Such application shall be made at such time and in such manner as the Secretary may by regulations prescribe.</div>