In an involuntary conversion,the basis of replacement property is its cost reduced by the gain deferred.

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In an involuntary conversion, such as when property is destroyed or condemned, the taxpayer can defer the gain and use it towards the basis of the replacement property. This means that the basis of the replacement property is equal to its cost reduced by the amount of gain that was deferred.

In an Involuntary Conversion,the Basis of Replacement Property Is Its