Rev. Rul. 63-221

For purposes of section 1033 of the Internal Revenue Code of 1954, threat or imminence of condemnation is generally considered to exist when a property owner is informed, either orally or in writing, by a representative of a governmental body or public official authorized to acquire property for public use, that such body or official has decided to acquire his property and the property owner has reasonable grounds to believe, from the information conveyed to him by such representative, that the necessary steps to condemn the property will be instituted if a voluntary sale is not arranged.

The same general rule will be applied in cases where a taxpayer obtains information, as to a decision to acquire his property for public use, through a report in a newspaper or other news medium, provided that he obtains confirmation from a representative of the governmental body or public official involved as to the correctness of the published report and has reasonable grounds to believe from the published report and its confirmation that the necessary steps to condemn his property will be instituted if a voluntary sale is not arranged.

The Internal Revenue Service may request that the taxpayer obtain written confirmation of any oral statements upon which he has relied from the governmental body, public official, or representative involved.

A threat or imminence of condemnation was held to exist at such time as a representative, who customarily acted for a public body having the authority to acquire land, advised the taxpayers that unless they agreed to sell part of their property to the public body, it would be condemned. Frank O. Maixner et al. v. Commissioner , 33 T.C. 191 (1959), acquiescence, page 5, this Bulletin. The Tax Court of the United States concluded that it was reasonable for the taxpayers to infer that the representative of the public body `spoke with sufficient authority to make it likely that his threats could and would be carried out' if the taxpayers did not agree to sell.

Revenue Ruling 58-557, C.B. 1958-2, 402, is considered distinguishable from the kinds of cases dealt with in the foregoing in that in Revenue Ruling 58-557 it appeared that the property involved was only being `considered for condemnation' by the city authorities, and its text does not indicate that a decision to acquire the taxpayer's property for public use had definitely been reached by such authorities. In any event, to the extent that Revenue Ruling 58-557 may be read as inconsistent with the foregoing, it is modified accordingly.