Involuntary Conversion with postponed gain

[michston]

Our rental property had an involuntary conversion due to casualty loss (hail destroyed the roof).  The insurance payment exceeded the adjusted basis of the existing roof, so I have a gain.  Since I used the insurance payment to replace the roof, I'd like to postpone the gain to the extent possible.  In TurboTax, after entering the disposal of the old roof it says to delete the disposal entry if you qualify to postpone the gain.  That action removes the corresponding Form 4684 but it does make sure the gain is not reported in net income.  However, after entering the 1033 election for postponing the gain, TurboTax displays on the Results of Election screen to "Use Form 4684 to report the facts relating to the involuntary conversion and the replacement property."   So here's my question - is Form 4684 really required since it was deleted as described above?   If it is needed, how do I add it back while keeping the gain from showing up in my net income?

[RobertG · Accepted solution]

IRS Publications 544 and 547 do not contain specific examples of how to complete Form 4684 in your situation.

Under personal use property Publication 547 says Don’t report on these forms any gain you postpone. (Page 19).  Under business property it says Use Form 4684 to report your gains and losses. (Page 19)

Since you don't have a gain or a loss to report, You should either not include the 4684 at all, or if you include it, only report the casualty to the extent you were reimbursed.

Since your return includes the required statement of the postponement of the gain, the gain is fully disclosed.

[michston]

Thank you RobertG