Rollover of Gain
From Sale of
Empowerment Zone Assets(p21)

You may qualify for a tax-free rollover of certain gains from the sale of qualified empowerment zone assets. This means that if you buy certain replacement property and make the election described in this section, you postpone part or all of the recognition of your gain.

You can make this election if you meet all the following tests.

1. You hold a qualified empowerment zone asset for more than 1 year and sell it at a gain.
2. Your gain from the sale is a capital gain.
3. During the 60-day period beginning on the date of the sale, you buy a replacement qualified empowerment zone asset in the same zone as the asset sold.

This means certain stock or partnership interests in an enterprise zone business. It also includes certain tangible property used in an enterprise zone business. You must have acquired the asset after December 21, 2000.

If you make the election described in this section, the gain on the sale is generally recognized only to the extent, if any, that the amount realized on the sale exceeds the cost of the qualified empowerment zone asset that you bought during the 60-day period beginning on the date of sale (and did not previously take into account in rolling over gain on an earlier sale of qualified empowerment zone assets).

If this amount is equal to or more than the amount of your gain, you must recognize the full amount of your gain. If this amount is less than the amount of your gain, you can postpone the rest of your gain by adjusting the basis of your replacement property as described next.

You must subtract the amount of postponed gain from the basis of the qualified empowerment zone assets you bought as replacement property.

For more information about rollover of gain, see the Instructions for Form 4797 and the instructions for Schedule D (and Form 8949) . Also, see section 1397B of the Internal Revenue Code.