IRS issues helpful guidance regarding involuntary conversion of inventory in a federally declared disaster

Washington National Tax Services
In recently released Technical Advice Memorandum 201111004, the IRS concluded that inventory involuntarily converted in a federally declared disaster was "property held for productive use in a trade or business" for purposes of section 1033(h)(2). Such inventory therefore qualifies for the involuntary conversation gain deferral rules under section 1033(a)(2). As shown in the list below, the rules discussed in the TAM are relevant to the recent federally declared disasters.

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