When a property is condemned, it is important for a landowner to understand the tax consequences of the compensation they receive. Landowners can defer paying taxes for compensation received from condemning authorities under IRS section 1033. Monies received through an eminent domain or condemnation proceeding have unique qualities, and landowners should consider taking advantage of an IRS section 1033 exchange.
While similar to a 1031 exchange in some ways, a 1033 exchange does not require a Qualified Intermediary and is not subject to the same strict time restrictions. In a 1033 exchange, the landowner can use the monies received to buy “like-kind” real property. This can defer the payment of taxes.
Braun & Gresham, PLLC helps Texas landowners threatened by condemnation or eminent domain to receive the best compensation and easement terms possible. Rather than simply paying the taxes for the year in which payment was received, the landowner should get the appropriate tax advice and consider deferring paying taxes on the compensation through an IRS section 1033 exchange.