Which of the Following Statements Is False Regarding Involuntary Conversions

question 45

Multiple Choice

Which of the following statements is false regarding involuntary conversions?

• A)A taxpayer must replace the destroyed property within the same tax year in which the gain is realized.
• B)A taxpayer cannot elect to defer recognition of a loss resulting from an involuntary conversion.
• C)If deferral of gain is elected,the holding period of the converted property carries over to the replacement property.
• D)Gain may be deferred if the property is involuntarily converted into property that is similar or related in service or use to the converted property.

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Definitions:

Ordinary Holder

A term used in finance to describe a person in possession of a negotiable instrument, like a check or bond, who has certain rights to it.

HDC (Holder in Due Course)

A party that has acquired a negotiable instrument in good faith and for value, therefore enjoying certain legal protections.

Unauthorized

Actions or access that have not been approved or sanctioned by the rightful authority.

Negotiates

The process of discussing and reaching a mutual agreement between parties, often involving the terms and conditions of a contract.