If the taxpayer qualifies under § 1033 (nonrecognition of gain from an involuntary conversion), makes the appropriate election, and the amount reinvested in replacement property is less than the amount realized, realized gain is:
A)Recognized to the extent of the deficiency (amount realized not reinvested).
B)Recognized to the extent of realized gain.
C)Recognized to the extent of the amount reinvested in excess of the adjusted basis.
D)Permanently not subject to taxation.

Question

Quizplus · Accepted Answer

Under § 1033, if the amount reinvested in replacement property is less than the amount realized, then the realized gain is recognized to the extent of the deficiency. Therefore, choice A is the correct answer.

If the Taxpayer Qualifies Under § 1033 (Nonrecognition of Gain