18.21 How To Elect To Defer Tax
To defer tax on your gain, do not report the gain as income for the year it is realized. Attach to your return a statement giving details of the transaction, including computation of the gain and your intention to buy a replacement if you have not yet done so. See the discussion of replacement periods and IRS notification requirements (18.22).
If your property is condemned and you are given similar property, no election is necessary. Postponement of tax on the gain is required. For example, the city condemns a store building and gives you another store building the value of which exceeds the cost basis of the old one; gain is not taxed.
Partnerships.
The election to defer gain must be made at the partnership level. Individual partners may not make separate elections unless the partnership has terminated, with all partnership affairs wound up. Dissolution under state law is not a termination for tax purposes.
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