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Postponement of Gain — How To Postpone a Gain: Disaster and Theft Tax Relief (2025 IRS Guide)

This guide covers “Postponement of Gain — How To Postpone a Gain” within disaster and theft tax relief. The following material presents the IRS treatment of this topic, including the qualifications, exceptions, and examples in the source section. Read the rules alongside the facts of your own situation before deciding what to report, deduct, or document.

Adapted from Publication 547 (2025), Casualties, Disasters, and Thefts, published by the Internal Revenue Service. This guide retains the source edition’s years, amounts, deadlines, and examples. It is guidance for that edition, not a statement that the same figures apply to every tax year.

Context for these rules

Don’t report a gain if you receive reimbursement in the form of property similar or related in service or use to the destroyed or stolen property. Your basis in the new property is generally the same as your adjusted basis in the property it replaces.

You must ordinarily report the gain on your stolen or destroyed property if you receive money or unlike property as reimbursement. However, you can choose to postpone reporting the gain if you purchase property that is similar or related in service or use to the stolen or destroyed property within a specified replacement period, discussed later. You can also choose to postpone reporting the gain if you purchase a controlling interest (at least 80%) in a corporation owning property that is similar or related in service or use to the property. See Controlling interest in a corporation, later.

If you have a gain on damaged property, you can postpone reporting the gain if you spend the reimbursement to restore the property.

To postpone reporting all the gain, the cost of your replacement property must be at least as much as the reimbursement you receive. If the cost of the replacement property is less than the reimbursement, you must include the gain in your income up to the amount of the unspent reimbursement.

Postponement of Gain — How To Postpone a Gain

You postpone reporting your gain from a casualty or theft by reporting your choice on your tax return for the year you have the gain. You have the gain in the year you receive insurance proceeds or other reimbursements that result in a gain.

If a partnership or a corporation owns the stolen or destroyed property, only the partnership or corporation can choose to postpone reporting the gain.

Required statement.

You should attach a statement to your return for the year you have the gain. This statement should include the following.

  • The date and details of the casualty or theft.

  • The insurance or other reimbursement you received from the casualty or theft.

  • How you figured the gain.

Replacement property acquired before return filed.

If you acquire replacement property before you file your return for the year you have the gain, your statement should also include detailed information about all of the following.

  • The replacement property.

  • The postponed gain.

  • The basis adjustment that reflects the postponed gain.

  • Any gain you are reporting as income.

Replacement property acquired after return filed.

If you intend to acquire replacement property after you file your return for the year in which you have the gain, your statement should also state that you are choosing to replace the property within the required replacement period.

You should then attach another statement to your return for the year in which you acquire the replacement property. This statement should contain detailed information on the replacement property.

If you acquire part of your replacement property in one year and part in another year, you must make a statement for each year. The statement should contain detailed information on the replacement property acquired in that year.

Substituting replacement property.

Once you have acquired qualified replacement property that you designate as replacement property in a statement attached to your tax return, you can’t later substitute other qualified replacement property. This is true even if you acquire the other property within the replacement period. However, if you discover that the original replacement property wasn’t qualified replacement property, you can (within the replacement period) substitute the new qualified replacement property.

Amended return.

You must file an amended return (individuals use Form 1040-X) for the tax year of the gain in either of the following situations.

  • You don’t acquire replacement property within the required replacement period plus extensions. On this amended return, you must report the gain and pay any additional tax due.

  • You acquire replacement property within the required replacement period plus extensions, but at a cost less than the amount you receive for the casualty or theft. On this amended return, you must report the portion of the gain that can’t be postponed and pay any additional tax due.

Three-year limit.

The period for assessing tax on any gain ends 3 years after the date you notify the director of the IRS for your area of any of the following.

  • You replaced the property.

  • You don’t intend to replace the property.

  • You didn’t replace the property within the replacement period.

Changing your mind.

You can change your mind about whether to report or to postpone reporting your gain at any time before the end of the replacement period.

Example.

Your property was destroyed in 2024 due to a federally declared disaster. Your insurance company reimbursed you $10,000, of which $5,000 was a gain. You reported the $5,000 gain on your return for 2024 (the year you realized the gain) and paid the tax due. In 2025, you bought replacement property. Your replacement property cost $9,000. Because you reinvested all but $1,000 of your reimbursement, you can now postpone reporting $4,000 ($5,000 − $1,000) of your gain.

To postpone reporting your gain, file an amended return for 2024 using Form 1040-X. You should attach an explanation showing that you previously reported the entire gain from the casualty but you now want to report only the part of the gain ($1,000) equal to the part of the reimbursement not spent for replacement property.

Using the guidance

Keep the documents that establish the dates, amounts, and circumstances described above. References to other chapters, forms, worksheets, or earlier and later sections refer to the linked IRS publication. Check the full publication and its updates before relying on a rule for a different tax year or a situation not addressed here.

Sources and further reading

The cited U.S. government text is in the public domain. Source accessed October 28, 2026. Fynoptic has organized this material for educational use and is independent of, and not endorsed by, the IRS.

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