Which of the Following Statements Is Incorrect for a §

question 135

Multiple Choice

Which of the following statements is incorrect for a § 1033 involuntary conversion?

• A)An election can be made to postpone gain on a § 1033 involuntary conversion only if the proceeds received are reinvested in qualifying property no later than two years after the date of the involuntary conversion.
• B)The postponement of realized gain in a § 1033 involuntary conversion is elective.
• C)The functional use test is satisfied if a business warehouse is replaced with another business warehouse.
• D)The taxpayer use test is satisfied if a shopping mall rented to tenants is replaced with an office building to be rented to tenants.
• E)All of the above are correct.

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Definitions:

Cash Ratio

A liquidity ratio that measures a company's ability to pay off short-term liabilities with cash and cash equivalents alone, without selling or liquidating other assets.

Cash Equivalents

Short-term, highly liquid investments that are readily convertible to known amounts of cash and have original maturities of three months or less.

Current Liabilities

Short-term financial obligations that are due within one year or within the normal operating cycle of the business, whichever is longer.

Debt-Equity Ratio

This ratio, a test of financial leverage, divides a company's liabilities by its stockholders' equity.