Joyce, a Farmer, Has the Following Events Occur During the Tax

question 204

Multiple Choice

Joyce, a farmer, has the following events occur during the tax year. Which of the events qualify as an involuntary conversion under § 1033 (nonrecognition of gain from an involuntary conversion) ?

• A) Her farm tractor is hauled to the city dump because it is worn out.
• B) She sells 10 acres of pasture land at a loss of $40,000 because she has reduced the size of her dairy herd in preparation for her retirement.
• C) Her personal residence, adjusted basis of $100,000, is condemned to make way for an interstate highway. She recovers condemnation proceeds of $175,000.
• D) She sells 10 acres of pasture land at a loss of $40,000 because she has reduced the size of her dairy herd due to a reduction in milk prices.
• E) None of the above.

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Definitions:

Facility Costs

Expenses associated with the physical buildings and infrastructure used in production, storage, and operations of a business.

Product Variety

The range of different products or services offered by a company to meet diverse customer needs or market segments.

Distribution Network

The linked network of warehouses and logistical systems that transport products from manufacturers to buyers.

Manufacturer Storage

The practice of holding inventory at the manufacturer’s location until it is needed for distribution or sale.