Tax consideration in condemnation proceedings;

              Tax Consideration
in Condemnation Proceedings
by Homer Gilchrist
Homer R. Gilchrist, audit supervisor in our Phoenix office, came to TRB&S in 1959 and spent three years in our
Detroit office before moving to Phoenix. He was an economics major at Oberlin College and received his B.A.
in 1958. He received his M.B.A. from the University of Michigan in 1959. Mr. Gilchrist is a member of the
American Institute of Certified Public Accountants, a member of the Arizona Society of Certified Public Account­ants,
where he serves on the Reporting Standards Committee, and a member of the American Institute of Internal
Auditors. He is a CPA in both Michigan and Arizona.
Do you own or manage real estate which has been
condemned or is likely to be? If so, your plight is one
which is becoming more widespread as the interstate
highway system progresses and more communities em­bark
on urban renewal projects. Business managers are
frequently forced to relocate a plant or office building
because the property on which the building is located has
been condemned. Similarly, investors in real property
may often have to find another investment because their
real estate has been taken by a condemning authority.
Condemnation proceedings not only interrupt business
operations and investment programs, but in many cases
result in partial or total loss of the property involved. This
loss gives rise to a variety of income tax problems because
of the special tax rules applicable. It is very important
that the owner or manager of property about to be con­demned
acquaint himself with these special rules, so that
he may realize the maximum tax benefit from the con­demnation
award.
The Tax Law of Condemnations
A condemnation of property is a tax transaction result­ing
in gain or loss very much as if the property were sold
or exchanged. A taxable gain or loss is realized when the
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