Remember adjusting an oddly shaped TV antenna to improve reception on channels higher than 13? If you do, the memory is likely distant.
Congress noticed a few years ago and mandated that the Federal Communications Commission (the “FCC”) repurpose Ultra High Frequency (a.k.a. “UHF”) broadcast spectrum that carried some of those channels, to create more room for mobile broadband. The FCC gave licensees holding rights to the repurposed spectrum the option of selling their existing licenses or accepting inferior rights.
One licensee wanted to sell and reinvest in other rights of their choosing without paying capital gains tax on the sale. The licensee asked the Internal Revenue Service to rule that Internal Revenue Code Section 1033, the same provision that allows tax-free reinvestment when the government takes real estate by condemnation, applies to allow tax-free reinvestment of the UHF license rights. The IRS agreed, even though the taxpayer technically was not forced to sell. The IRS ruled that the option to accept other rights did not prevent Section 1033 tax deferral because the inferiority of the substitute rights the FCC offered justified ignoring that alternative. The IRS found the transaction amounted to a forced sale and therefore qualified for tax deferral.
If the government gives you a “false” choice between selling your property or accepting an inferior alternative, this ruling explains how to defer tax on the sale if you reinvest the proceeds. But we do not recommend trying this strategy with your old UHF TV antenna. You probably won’t recognize gain to defer anyway.
Here is a link to the IRS ruling: https://www.irs.gov/pub/irs-wd/201702034.pdf