Which of the following is/are correct regarding involuntary conversions?
I.Gains may be deferred if the property involuntarily converted is replaced with property that is similar to or related in service or use to the converted property.
II.Deferral of gains is elective only if direct conversion is made into similar property.

A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.

Question

Which of the following is/are correct regarding involuntary conversions?
I.Gains may be deferred if the property involuntarily converted is replaced with property that is similar to or related in service or use to the converted property.
II.Deferral of gains is elective only if direct conversion is made into similar property.
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A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.

Quizplus · Accepted Answer

Statement I is correct as according to Section 1033 of the Internal Revenue Code, gains can be deferred if the property involuntarily converted is replaced with property that is similar to or related in service or use to the converted property. However, statement II is incorrect as deferral of gains is not elective only if direct conversion is made into similar property.

Which of the Following Is/are Correct Regarding Involuntary Conversions