On an Involuntary Conversion in Which the Taxpayer Does Not

question 37

Multiple Choice

On an involuntary conversion in which the taxpayer does not buy replacement property within the replacement period,the gain on the involuntary conversion and any tax due must be reported:

• A)Never,because the tax year of the conversion would be closed.
• B)In the year the involuntary conversion occurred.
• C)As soon as the taxpayer knows replacement property will not be purchased.
• D)In the year the replacement period expires.

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Definitions:

Payout Figure

The total amount paid out to a policyholder in an insurance claim or to an investor in dividends or withdrawals.

Compounded Quarterly

A method of calculating interest where the accumulated interest is added to the principal sum every quarter (every three months), affecting the amount on which future interest is calculated.

Principal

The initial amount of money loaned or invested, excluding any interest or dividends.

Interest

The charge for borrowing money or the return on investment, typically expressed as a percentage.