In What Instances,concerning Involuntary Conversions,must a Taxpayer File an Amended

question 71

Multiple Choice

In what instances,concerning involuntary conversions,must a taxpayer file an amended tax return (Form 1040X) ?

• A) When the taxpayer does not buy replacement property within the replacement period.
• B) When the replacement property purchased by the taxpayer costs less than the amount realized for the converted property.
• C) When the entire amount of the insurance proceeds is used to purchase replacement property.
• D) Both the taxpayer does not buy replacement property within the replacement period and the replacement property purchased by the taxpayer costs less than the amount realized for the converted property.

---

Definitions:

Accounting Profits

The sales revenues minus the expenses of a firm over a designated time period, usually one year. Accounting profits typically make allowances for changes in the firm’s inventories and depreciation of its assets. No allowance is made, however, for the opportunity cost of the equity capital of the firm’s owners, or other implicit costs.

Zero

Zero is a numerical value representing the absence of any quantity or magnitude; it plays a central role in mathematics and economics.

Corporate Form

A legal structure for a business, recognized by law as separate from its owners, with its own rights, privileges, and liabilities.

Business Revenues

The income generated from the sale of goods and services before any costs or expenses are deducted.