The American Institute of CPAs (AICPA) urged the IRS to automate its process for granting extensions for taxpayers to replace damaged property after a federally declared disaster, while still deferring gains. The change is needed, the group said in a January 5 letter, to provide taxpayers with greater certainty after a disaster.

Short of universal automatic extensions, the group is calling for automated extensions when taxpayers’ requests have been pending with the IRS for a set duration.

Replacement Period for Involuntary Conversions

Generally, under IRC § 1033(a)(2)(B), a taxpayer who purchases similar property after an involuntary conversion may defer gain for a two-year period. For condemned real property used in a trade or business or held for investment and replaced with like-kind property, the period is three years. A four-year period applies for principal residences in federally declared disaster areas.

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