Page:United States Statutes at Large Volume 92 Part 1.djvu/1388

 92 STAT. 1334

PUBLIC LAW 95-472—OCT. 17, 1978 SEC. 4. INVOLUNTARY CONVERSION OF SPECIALLY VALUED FARM, ETC., REAL PROPERTY. (a) IN GENERAL.—Section 2032A of the I n t e r n a l Revenue Code of 1954 (relating to valuation of certain farm, etc., real property) is amended by a d d i n g a t the end the following new subsection:

26 USC 2032A.

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" (h) SPECIAL RULES FOR INVOLUNTARY CONVERSIONS OF QUALIFIED R E A L PROPERTY.— " (1) TREATMENT OF CONVERTED PROPERTY.—

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" (A) IN GENERAL.—If there is an involuntary conversion of an interest in qualified real property and the qualified heir makes a n election under this subsection— " (i) no tax shall be imposed by subsection (c) on such conversion if the cost of the qualified replacement property equals or exceeds the amount realized on such conversion, or " ( i i) if clause (i) does not apply, the amount of the tax imposed by subsection (c) on such conversion shall be the amount determined under subparagraph (B). " (B) A M O U N To r TAX WHERE THERE I S NOT COMPLETE REIN-

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VESTMENT.—The amount determined under this subparagraph with respect to any involuntary conversion is the amount of the tax which ( b u t for this subsection) would have been imposed on such conversion reduced by an amount which«(i) bears the same ratio to such tax, as i) " ( i ii) the cost of the qualified replacement property ) bears to the amount realized on the conversion. " (2) TREATMENT OF REPLACEMENT PROPERTY.—For purposes of

26 USC 1033.

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subsection (c) — " (A) any qualified replacement property shall be treated in the same manner as if it were a portion of the interest in qualified real property which was involuntarily converted, except that with respect to such qualified replacement property— " (i) the 15-year period under paragraph (1) of subsection (c) shall be extended by any period, beyond the 2-year period referred to in section 1033(a)(2)(B)(i), during which the qualified heir was allowed to replace ,;. the qualified real property, and " ( l i) the phaseout period under paragraph (3) of subsection (c) shall be appropriately adjusted to take into account the extension referred to in clause (i), " (B) any tax imposed by subsection (c) on the involuntary conversion shall be treated as a tax imposed on a partial disposition, and " (C) paragraph (7) of subsection (c) shall be applied— " (i) by not taking into account periods after the involu n t a n r conversion and before the acquisition of the qualified replacement property, and " ( i i) by treating material participation with respect to the converted property as material participation with respect to the qualified replacement property. "(3)

DEFINITIONS AND SPECIAL RULES.—For purposes of t h i s

subsection—

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