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

question 66

Multiple Choice

Joyce, a farmer, has the following events occur during the tax year.Which of the events qualifies for 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.

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Definitions:

Inventory

The total amount of goods and materials held by a company awaiting sale or use in production.

Accounts Receivable

Funds that customers owe a business for products or services already delivered or utilized but not yet paid for.

Raw Materials

Fundamental substances or components used in the initial stages of the manufacturing process to produce goods.

Cash Disbursements

The payment of cash by a business for expenses, purchases, or obligations.