Extended replacement period for involuntarily converted property located in the Hurricane Katrina disaster area. The replacement period for property in the Hurricane Katrina disaster area that was involuntarily converted after August 24, 2005, has been extended from 2 years to 5 years. For details, see Involuntary Conversions in chapter 1. Also, see the Instructions for Form 4684, Casualties and Thefts.

Extened deadlines for certain like-kind exchange transactions in Presidentially declared disaster areas. Certain deadlines are extended to section 1031 like-kind exchange transactions that are affected by a Presidentially declared disaster. Acts extended include the 45-day identification period, the 180-day exchange period, the 5-business day period to enter into a qualified exchange accommodation (QEAA). For details about like-kind exchanges, see Nontaxable Exchanges and, for information about extended deadlines, see Revenue Procedure 2005-27 on page 1050 of Internal Revenue Bulletin 2005-20 at www.irs.gov/pub/irs-irbs/irb05-20.pdf.

Additional special depreciation allowances. .  The 30% and 50% special depreciation allowances will not apply to most property placed in service after 2004. However, the special depreciation allowances are subject to depreciation recapture. See Depreciation Recapture in chapter 3.

Sale of DC Zone assets.  If you sold or exchanged a District of Columbia Enterprise Zone (DC Zone) asset that you held for more than 5 years, you may be able to exclude the “qualified capital gain”. For more information, see Exclusion of Gain From Sale of DC Zone Assets at the end of chapter 1.

Dispositions of U.S. real property interests by foreign persons. If you are a foreign person or firm and you sell or otherwise dispose of a U.S. real property interest, the buyer (or other transferee) may have to withhold income tax on the amount you receive for the property (including cash, the fair market value of other property, and any assumed liability). Corporations, partnerships, trusts, and estates also may have to withhold on certain U.S. real property interests they distribute to you. You must report these dispositions and distributions and any income tax withheld on your U.S. income tax return. For more information on dispositions of U.S. real property interests, see Publication 519, U.S. Tax Guide for Aliens.

Foreign source income. If you are a U.S. citizen with income from dispositions of property outside the United States (foreign income), you must report all such income on your tax return unless it is exempt from U.S. law. This is true whether you reside inside or outside the United States and whether or not you receive a Form 1099 from the foreign payor.

Photographs of missing children. The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.

This publication explains the tax rules that apply when you dispose of property. It discusses the following topics.

This publication also explains whether your gain is taxable or your loss is deductible.

This publication does not discuss certain transactions covered in other IRS publications. These include the following.

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