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.

Question

Quizplus · Accepted Answer

Only the condemnation of her personal residence qualifies as an involuntary conversion because it was taken by a government entity for public use. The other events were voluntary decisions made by Joyce and do not qualify as involuntary conversions.

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