On an involuntary conversion in which the taxpayer does not buy replacement property within the replacement period,the gain on the involuntary conversion and any tax due must be reported:
A)In the year the replacement period expires.
B)In the year the involuntary conversion occurred.
C)Never,because the tax year of the conversion would be closed.
D)As soon as the taxpayer knows replacement property will not be purchased.

Question

Quizplus · Accepted Answer

The gain on the involuntary conversion and any tax due must be reported in the year the involuntary conversion occurred, regardless of whether replacement property is purchased within the replacement period. Taxpayers must report the gain on Form 4684 and Form 4797. If replacement property is purchased after the tax return is filed, the taxpayer may be able to amend the return to claim any tax benefits associated with the replacement property.

On an Involuntary Conversion in Which the Taxpayer Does Not