4.26 Ark. Code R. 51-412(a)

Current through Register Vol. 49, No. 9, September, 2024

Rule 4.26-51-412(a) - Property Acquired as a Result of an Involuntary Conversion

In the case of property acquired as a result of an involuntary conversion, the basis of the property shall be the same as that of the property so converted with the following adjustments:

a) decreased in the amount of any money received by the taxpayer which was not expended;

b) increased in the amount of the gain; and

c) decreased in the amount of loss to the taxpayer recognized upon such conversion applicable to the year in which the conversion was made. See 1. 26-51-404(b)(1).

In any case where the taxpayer elects to replace or restore the converted property but it is not feasible to do so immediately, the taxpayer may obtain permission to establish a replacement fund in which part or all of the compensation received shall be held, without any deduction for the payment of a mortgage. The taxpayer should apply to the Department for permission to establish a replacement fund. The application should recite all the facts relating to the transaction and declare that the taxpayer will proceed as quickly as possible to replace or restore such property. The taxpayer will be required to furnish a surety bond in an amount not to exceed double the estimated additional income taxes which would be payable if no replacement fund were established. The estimated additional taxes for the amount of which the taxpayer is required to furnish security should be computed at the rates at which the taxpayer would normally be required to pay. Only surety companies will be approved as sureties. The application should be executed in triplicate, so that the Department, the taxpayer and the surety or depository may each have a copy.

4.26 Ark. Code R. 51-412(a)