Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 72-27

1972-1 C.B. 226

Sec. 1033

IRS Headnote

Good faith reliance on the advice of both a reputable accountant and a reputable attorney that no gain was realized on involuntarily converted property is "reasonable cause" for failure to file a timely application to extend the replacement period.

Full Text

Rev. Rul. 72-27

A taxpayer, relying in good faith on the advice of a reputable accountant and attorney, both of whom were experienced in Federal tax matters and to whom all relevant information had been furnished, that gain had not been realized upon an involuntary conversion of property, failed to acquire replacement property within the period specified in section 1033(a)(3)(B) of the Internal Revenue Code of 1954. Shortly after the expiration of the specified replacement period, however, the taxpayer discovered that gain had, in fact, been realized upon the involuntary conversion and immediately filed an application, pursuant to section 1.1033(a)-2(c)(3) of the Income Tax Regulations, for an extension of the replacement period.

Held, the taxpayer's reliance upon the advice in the instant case is "reasonable cause," within the meaning of section 1.1033(a)-2(c)(3) of the regulations, for not having timely filed the application to extend the required replacement period. See Revenue Ruling 172, C.B. 1953-2, 226, which holds that the delinquency penalty under section 291 of the 1939 Code (Section 6651 of the 1954 Code) should not be assessed where failure to file a timely Form 1120H is attributable to reliance in good faith upon the advice of a reputable accountant or attorney, experienced in Federal tax matters, and to whom all relevant information was furnished.