Joyce, a Farmer, Has the Following Events Occur During the Tax

question 204

Multiple Choice

Joyce, a farmer, has the following events occur during the tax year. Which of the events qualify as an involuntary conversion under § 1033 (nonrecognition of gain from an involuntary conversion) ?

• A) Her farm tractor is hauled to the city dump because it is worn out.
• B) She sells 10 acres of pasture land at a loss of $40,000 because she has reduced the size of her dairy herd in preparation for her retirement.
• C) Her personal residence, adjusted basis of $100,000, is condemned to make way for an interstate highway. She recovers condemnation proceeds of $175,000.
• D) She sells 10 acres of pasture land at a loss of $40,000 because she has reduced the size of her dairy herd due to a reduction in milk prices.
• E) None of the above.

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Definitions:

Goal

A desired result or outcome that a person or organization envisions, plans, and commits to achieve.

Simple Interest

Interest calculated only on the principal amount, without compounding.

Account

A record or statement that details financial transactions and their impact on an entity's financial position.

Guaranteed Annual Rate

The minimum annual return promised to an investor by an investment product, regardless of market conditions.