Updated November 5, 2026. Quick answer: The Worksheet for Condemnations in Publication 544 (2025), Table 1-3, has three parts and 24 lines. Part 1 (lines 1 to 8) finds the gain on severance damages, Part 2 (lines 9 to 16) compares your net condemnation award with the adjusted basis of the condemned property to give a gain or a loss, and Part 3 (lines 17 to 24) splits a gain into the part you report (line 23) and the part you postpone (line 24) when you buy replacement property. A loss on property you held for personal use cannot be deducted.
Canceled-debt, foreclosure and abandonment forms: Form 1099-A box 4 and box 5 (fair market value and personal liability) and Publication 544 Table 1-2 (foreclosure and repossession worksheet).
When this worksheet applies
The publication says “If your property was condemned or disposed of under the threat of condemnation, figure your gain or loss by comparing the adjusted basis of your condemned property with your net condemnation award.” Gain or loss on a condemnation is an involuntary conversion: “An involuntary conversion occurs when your property is destroyed, stolen, condemned, or disposed of under the threat of condemnation and you receive other property or money in payment, such as insurance or a condemnation award.” The table in the publication is a tool for that comparison, and it names its own uses: “You can use Part 2 of Table 1-3 to figure your gain or loss from a condemnation award.” Part 1 is for severance damages and Part 3 is for the gain you may postpone.
Terms the lines depend on
The award. “A condemnation award is the money you are paid or the value of other property you receive for your condemned property.” The publication also counts debts paid out of it: “Amounts taken out of the award to pay your debts are considered paid to you.” Interest is separate: “If the condemning authority pays you interest for its delay in paying your award, it is not part of the condemnation award”.
The net award. “A net condemnation award is the total award you received or are considered to have received for the condemned property minus your expenses of obtaining the award.” For a special assessment: “To figure your net condemnation award, you must reduce the amount of the award by the assessment retained from the award”.
Severance damages. “Severance damages are not part of the award paid for the property condemned.” They are “paid to you if part of your property is condemned and the value of the part you keep is decreased because of the condemnation.” The publication also says “The contracting parties should agree on the specific amount of severance damages in writing”. If they do not, the publication treats all proceeds from the condemning authority as awarded for the condemned property.
Part 1, lines 1 to 8: gain from severance damages
The worksheet opens with “If you did not receive severance damages, skip Part 1 and go to Part 2.” Otherwise:
| Line | What it asks |
|---|---|
| 1 | “Enter gross severance damages received” |
| 2 | “Enter your expenses in getting severance damages” |
| 3 | “Subtract line 2 from line 1. If less than zero, enter -0-” |
| 4 | “Enter any special assessment on remaining property taken out of your award” |
| 5 | “Net severance damages. Subtract line 4 from line 3. If less than zero, enter -0-” |
| 6 | “Enter the adjusted basis of the remaining property” |
| 7 | “Gain from severance damages. Subtract line 6 from line 5. If less than zero, enter -0-” |
| 8 | “Refigured adjusted basis of the remaining property. Subtract line 5 from line 6. If less than zero, enter -0-” |
The publication’s reason for the last line: “Your net severance damages are treated as the amount realized from an involuntary conversion of the remaining part of your property. Use them to reduce the basis of the remaining property.” Line 8 is that reduced basis.
Part 2, lines 9 to 16: gain or loss from the condemnation award
| Line | What it asks |
|---|---|
| 9 | “Enter the gross condemnation award received” |
| 10 | “Enter your expenses in getting the condemnation award” |
| 11 | “If you completed Part 1 and line 4 is more than line 3, subtract line 3 from line 4. If you did not complete Part 1 but a special assessment was taken out of your award, enter that amount. Otherwise, enter -0-” |
| 12 | “Add lines 10 and 11” |
| 13 | “Net condemnation award. Subtract line 12 from line 9” |
| 14 | “Enter the adjusted basis of the condemned property” |
| 15 | “Gain from condemnation award. If line 14 is more than line 13, enter -0-. Otherwise, subtract line 14 from line 13 and skip line 16” |
| 16 | “Loss from condemnation award. Subtract line 13 from line 14” |
Line 16 carries a note in the worksheet itself: “You cannot deduct the amount on line 16 if the condemned property was held for personal use.” The text around the table adds “If your loss is from property you held for personal use, you cannot deduct it. You must report any deductible loss in the tax year it happened”.
Part 3, lines 17 to 24: postponed gain
Part 3 begins with a condition: “Complete only if line 7 or line 15 is more than zero and you bought qualifying replacement property or made expenditures to restore the usefulness of your remaining property.”
| Line | What it asks |
|---|---|
| 17 | “If you completed Part 1 and line 7 is more than zero, enter the amount from line 5. Otherwise, enter -0-” |
| 18 | “If line 15 is more than zero, enter the amount from line 13. Otherwise, enter -0-” |
| 19 | “Add lines 17 and 18. If the condemned property was your main home, subtract from this total the gain you excluded from your income and enter the result” |
| 20 | “Enter the total cost of replacement property and any expenses to restore the usefulness of your remaining property” |
| 21 | “Subtract line 20 from line 19. If less than zero, enter -0-” |
| 22 | “If you completed Part 1, add lines 7 and 15. Otherwise, enter the amount from line 15. If the condemned property was your main home, subtract from this total the gain you excluded from your income and enter the result” |
| 23 | “Recognized gain. Enter the smaller of line 21 or line 22” |
| 24 | “Postponed gain. Subtract line 23 from line 22. If less than zero, enter -0-” |
In plain terms, line 23 is the gain you must still report and line 24 is the gain you postpone. The publication explains the rule behind them: “To postpone reporting all the gain, you must buy replacement property costing at least as much as the amount realized for the condemned property.” It continues “If the cost of the replacement property is less than the amount realized, you must report the gain up to the unspent part of the amount realized”.
Two examples from the publication
Special assessment retained. The publication’s example is a city that condemned a strip of land: the award was $5,000, the owner spent $300 to get it, and the city kept a $700 special assessment against the rest of the lot. The city paid $4,300, but the net award is $4,000: $5,000 minus $300 and minus $700. On this worksheet the $700 goes on line 11 (no Part 1), so line 12 is $1,000 (computed) and line 13 is $4,000 (computed).
Severance damages first. In the publication’s second example the award was $4,000 for the property and $1,000 for severance damages, the owner spent $300 to obtain the severance damages, and a $800 special assessment was retained. The text says “Any balance of the special assessment is used to reduce the condemnation award.” The severance damages go to zero after the $300 of expenses and $700 of the assessment, and the $100 balance reduces the award to $3,900. On the worksheet that is line 3 at $700 (computed), line 5 at -0- (computed), line 11 at $100 (computed, line 4 minus line 3) and line 13 at $3,900 (computed).
A worked case with invented numbers
Illustration, not an IRS example: the publication prints no filled-in version of this worksheet. All the entries marked invented are made up, the property is not the main home, and the lines marked computed follow the worksheet’s own arithmetic.
| Line | Entry | Value |
|---|---|---|
| 1 | Gross severance damages received (invented) | $10,000 |
| 2 | Expenses in getting the severance damages (invented) | $1,000 |
| 3 | Line 1 minus line 2 (computed) | $9,000 |
| 4 | Special assessment on the remaining property taken out of the award (invented) | $2,000 |
| 5 | Line 3 minus line 4 (computed) | $7,000 |
| 6 | Adjusted basis of the remaining property (invented) | $5,000 |
| 7 | Line 5 minus line 6 (computed) | $2,000 |
| 8 | Line 6 minus line 5 is less than zero, so (computed) | -0- |
| 9 | Gross condemnation award received (invented) | $90,000 |
| 10 | Expenses in getting the condemnation award (invented) | $3,000 |
| 11 | Line 4 is not more than line 3, so | -0- |
| 12 | Line 10 plus line 11 (computed) | $3,000 |
| 13 | Line 9 minus line 12 (computed) | $87,000 |
| 14 | Adjusted basis of the condemned property (invented) | $60,000 |
| 15 | Line 13 minus line 14 (computed) | $27,000 |
| 16 | Line 15 is a gain, so this line is skipped | N/A |
| 17 | Part 1 done and line 7 is more than zero, so the amount on line 5 | $7,000 |
| 18 | Line 15 is more than zero, so the amount on line 13 | $87,000 |
| 19 | Line 17 plus line 18, not the main home so nothing to subtract (computed) | $94,000 |
| 20 | Cost of replacement property (invented) | $80,000 |
| 21 | Line 19 minus line 20 (computed) | $14,000 |
| 22 | Line 7 plus line 15 (computed) | $29,000 |
| 23 | Smaller of line 21 and line 22 (computed) | $14,000 |
| 24 | Line 22 minus line 23 (computed) | $15,000 |
Line 23 is $14,000 (computed): that is the gain you recognize. Line 24 is $15,000 (computed): that part is postponed. A smaller case shows the loss branch: with a made-up award of $40,000, expenses of $2,500 and an adjusted basis of $50,000, line 13 is $37,500 (computed), line 15 is -0- and line 16 is $12,500 (computed), and if the property was held for personal use that loss is not deductible.
Main home, personal-use property and the replacement period
For a main home the publication says “If you have a gain because your main home is condemned, you can generally exclude the gain from your income as if you had sold or exchanged your home.” The publication says you may be able to exclude up to $250,000 of the gain, or $500,000 if married filing jointly. Lines 19 and 22 are where you subtract the excluded gain. The home-sale rules themselves are in the home sale gain or loss worksheet and the Publication 523 guide.
The replacement period matters for line 20. “The replacement period generally ends 2 years after the end of the first tax year in which any part of the gain on the condemnation is realized.” For real property used in a trade or business or held for investment the period is 3 years, and for a main home in a federally declared disaster area it is 4 years, with exceptions the publication lists.
Edition
This page reads Publication 544 (2025), Sales and Other Dispositions of Assets, the file irs.gov served on 2026-11-05 (sha256 in the kit data). Line numbers belong to that edition, so check the label printed on the worksheet in your own copy before you follow a line reference.
Common mistakes
- Skipping line 11. A special assessment retained out of the award reduces the net award when you did not complete Part 1, and when you did, whatever part of it the severance damages cannot absorb.
- Forgetting that debts paid from the award count as received. The award for line 9 is the full award, not only the cash that reached you.
- Leaving the excluded gain in lines 19 and 22 when the condemned property was your main home. Both lines subtract it.
- Deducting a line 16 loss on personal-use property. The worksheet says it cannot be deducted.
- Treating line 24 as tax saved. It is gain you postpone, and the basis of the replacement property is reduced by it.
Related: Publication 544, the home sale gain or loss worksheet, and Form 4797.
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- Publication 544 (2025), Sales and Other Dispositions of Assets: https://www.irs.gov/pub/irs-pdf/p544.pdf
- IRS, About Publication 544, Sales and Other Dispositions of Assets: https://www.irs.gov/forms-pubs/about-publication-544
Read from the IRS documents linked above on November 5, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the account provider or the IRS is the right place to confirm anything consequential.