Revenue Ruling 79-261
Internal Revenue Service
1979-2 C.B. 295 (1979)
A taxpayer corporation was engaged in the banking business. The corporation owned an office building that the corporation leased to produce rental income. In 1977, after a tornado destroyed the office building, the corporation received insurance proceeds that the corporation used to build a new office building. The corporation conducted banking business out of part of the new building but leased the rest of the building to produce rental income under leases that were similar to the leases between the corporation and tenants in the original building. Section 1033(a) of the Internal Revenue Code provides for nonrecognition of gain on the involuntary conversion of a taxpayer’s property into replacement property that is similar or related in service or use. The Internal Revenue Service (IRS) issued a revenue ruling regarding whether the corporation’s use of the insurance proceeds to build the new building—which the IRS described as the reinvestment of proceeds from an involuntary conversion—qualified as a replacement of the office building with property that was similar or related in service or use for purposes of § 1033.
Rule of Law
Holding and Reasoning ()
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