If the Taxpayer Qualifies Under § 1033 (Nonrecognition of Gain

question 34

Multiple Choice

If the taxpayer qualifies under § 1033 (nonrecognition of gain from an involuntary conversion) and the amount reinvested in replacement property exceeds the amount realized,the basis of the replacement property is:

• A)The cost of the replacement property.
• B)The adjusted basis of the involuntarily converted property.
• C)The cost of the replacement property minus the postponed gain.
• D)The cost of the replacement property plus the excess of the reinvestment over the amount realized from the involuntary conversion.
• E)None of the above.

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Definitions:

Fair Market Value

The price at which an asset would change hands between a willing buyer and seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of the relevant facts.

Accumulated Depreciation

The total amount of depreciation expense that has been recorded against a fixed asset, over its useful life, up to the current date.

Salvage Value

The estimated value that an asset will realize upon its sale at the end of its useful life, used in calculating depreciation.

Discarded

Discarded refers to items or substances that have been thrown away or disposed of, no longer deemed useful or necessary.