1033: Involuntary Conversion
My questions are related to 26 USC 1033 for involuntary conversions. I looked but could not find an answer. I hope someone here can help. 1. To utilize section 1033(a)(1) and (b)(2) to defer a tax burden, does the property that is being compulsory or involuntarily converted have to reside within the USA? 2. Also, can the converted property still qualify under this section if the property is being converted by a foreign national government? To provide some context, I am an individual (not a business) who has a property within Hong Kong. Earlier this year, the city government of Hong Kong sent a notice to inform property owners within an area the government is purchasing back all the properties within the stated area for the purpose of tearing down the existing buildings and redeveloping the area. The notice further stated that if the owners within the designated areas did not agree to sell their properties back within a certain time, the government would forcibly purchase the property within the next year. I own a condo within this area and feel like this falls within the 1033 provision. After the sale I want to take the proceeds and purchase another property within the city, but I want to make sure that I am complying with all tax obligations. Within section 1033, there was no indication that the properties had to be within the USA nor indication that only conversions by the USA or other state/municipal governments would apply. Any information would be helpful.
