Entering a 1033 election for an involuntary conversion in Lacerte

An involuntary conversion (or involuntary exchange) occurs when property is destroyed, stolen, condemned, or disposed of under the threat of condemnation, and the taxpayer receives other property or money in payment, such as insurance or a condemnation award.

Rules for reporting a gain or loss from an involuntary conversion:

• The property must not be the taxpayer's main home
• The gain or loss is reported on the tax return for the year the gain or loss was realized
  • A loss from an involuntary conversion of property held for personal use can only be deducted if the loss resulted from a casualty or theft.

See IRS article Involuntary Conversions - Real Estate Tax Tips for more information.

To enter a 1033 election for an involuntary conversion on an individual or business return

1. Go to Screen 46, Elections.
2. Select Other Election from the left-hand menu.
3. Scroll down to the Other Election section.
4. Enter Election title and Election text. 

To override a gain from an involuntary conversion

1. Go to Screen 17, Dispositions.
2. Select Schedule D/4797/etc. from the dropdown menu.
3. Select Overrides from the left-hand menu.
4. Under the section Overrides, enter a -1 in the field Total gain (loss) [O].

How do I enter a Condemnation of Property?

To report the deferment of the gain on Form 4797 under Section 1033:

Individual

1. Go to Screen 17, Dispositions.
2. Enter the Description, Date acquired, Date sold, Sales price (if any) and Cost or basis.
3. Scroll down to the Form 4797 section.
4. Enter the appropriate amount or a -1 in Depreciation allowed (-1 = none, triggers 4797).
5. Scroll down to the Overrides section.
6. Enter a -1 in Total gain (loss) [O].
7. Go to Screen 46, Elections.
8. Click on Election 1 from the top left navigation panel, or click on Add.
9. Scroll down to the Other Election section.
10. Hold down Ctrl+E in Election title and enter the applicable information.
11. Click OK.
12. Hold down Ctrl+E in Election text to enter the applicable information. (See the Election Text section below for more information.)
13. Click OK.

Partnership

1. Go to Screen 19, Dispositions.
2. Enter the Description, Date acquired, Date sold, Sales price (if any) and Cost or basis.
3. Scroll down to the Form 4797 section.
4. Enter the appropriate amount or a -1 in Depreciation allowed (-1 = none, triggers 4797).
5. Go to Screen 22 , Other Schedule K items.
6. Scroll down to the Income (Loss) section.
7. Enter the gain amount as a negative in Section 1231 gain (loss) [A].
8. Go to Screen 34, Notes.
9. Select Statement in the Print As box from the left navigation panel.
10. Enter the appropriate text for the election. (See the Election Text section below for more information.)

S Corporate

1. Go to Screen 23, Dispositions.
2. Enter the Description, Date acquired, Date sold, Sales price (if any) and Cost or basis.
3. Scroll down to the Form 4797 section.
4. Enter the appropriate amount or a -1 in Depreciation allowed (-1 = none, triggers 4797).
5. Go to Screen 20, Income and Deductions.
6. Scroll down to the Income (Loss) section.
7. Enter the gain amount as a negative in Section 1231 gain (loss) [A].
8. Go to Screen 39, Notes.
9. Select Statement in the Print As box from the left navigation panel.
10. Enter the appropriate text for the election. (See the Election Text section below for more information.)

Corporate

1. Go to Screen 15, Dispositions.
2. Enter the Description, Date acquired, Date sold, Sales price (if any) and Cost or basis.
3. Scroll down to the Form 4797 section.
4. Enter the appropriate amount or a -1 in Depreciation allowed (-1 = none, triggers 4797).
5. Click on Add button from the left navigation panel.
6. Enter a Description for the adjustment.
7. Scroll down to the Overrides section.
8. Enter the gain amount as a negative in Total gain (loss) [O].
9. Go to Screen 42, Notes.
10. Select Statement in the Print As box from the left navigation panel.
11. Enter the appropriate text for the election. (See the Election Text section below for more information.)