Which of the Following Is/are Correct Regarding the Deferral of Gain

question 80

Multiple Choice

Which of the following is/are correct regarding the deferral of gain attributable to the involuntary conversion of personal property (personalty) ?
I.Gain deferral is mandatory.
II.Replacement property must be acquired within one year of the close of the tax year in which gain is realized from an involuntary property damage conversion.
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• A)Only statement I is correct.
• B)Only statement II is correct.
• C)Both statements are correct.
• D)Neither statement is correct.

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Definitions:

Legal Title

The formal ownership of an asset or property, recognized by law, granting the holder specific rights and responsibilities.

Cost of Goods Available

It represents the total value of inventory available for sale during a period, calculated by adding the cost of goods purchased or manufactured to the opening inventory.

Consignment Arrangement

An agreement where goods are placed in the hands of another party to sell, but the ownership remains with the supplier until the goods are sold.

Consignor Ownership

Describes a situation where goods are given to another party (consignee) to sell, but the original party (consignor) retains ownership until the goods are sold.