If a taxpayer elected to defer a $13,000 gain realized on an involuntary conversion, the tax basis of the taxpayer's replacement property equals the cost of the property less $13,000.

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The tax basis of the replacement property in an involuntary conversion is generally the cost of the property reduced by the amount of any gain that was deferred. If a taxpayer defers recognizing a $13,000 gain, the basis of the replacement property would indeed be its cost minus the $13,000 deferred gain.

If a Taxpayer Elected to Defer a $13,000 Gain Realized