The Taxpayer-Use Test for Deferral of Gain on an Involuntary

question 76

True/False

The taxpayer-use test for deferral of gain on an involuntary conversion requires the taxpayer to acquire property that has the same function or use as the involuntarily converted property that he or she used prior to the conversion.

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Definitions:

Unadjusted Cost of Goods Sold

The initial calculation of the cost of products sold before any adjustments or corrections are made.

Total Manufacturing Cost

The aggregate of all costs—direct materials, direct labor, and manufacturing overhead—incurred in producing finished goods.

Raw Materials

are the basic, unprocessed inputs used in the manufacture of goods and products.

Indirect Materials

These are materials used in the production process that are not directly traceable to the finished product.