Present law allows taxpayers not to recognize gain with respect to homes that are damaged or destroyed as a result of a prosidentially declared disaster if the taxpayer replaces the property within a four-year period. Business property that is destroyed must be replaced within a two-year period to avoid gain recognition. The provision extends the replacement period to five years property that was damaged or destroyed within the presidentially declared area for Katrina. The extended replacement period applies to principal residences and business property, and the replacement property must be located on the declared disaster area.
