Final answer:
The involuntary conversion provisions that allow for deferral of gain are elective, not mandatory. Taxpayers have the choice to defer gain by purchasing similar property within a specified period.
Step-by-step explanation:
The involuntary conversion provisions, which are part of the Internal Revenue Code, allow a taxpayer to defer recognition of a gain if the proceeds from an involuntary conversion such as casualties, thefts, or condemnation, are reinvested in similar property. In response to the question, the provisions for deferral of gain from involuntary conversions are not mandatory; they are elective. Taxpayers may choose to report the gain in the tax year it occurs or opt to defer recognition of the gain if they purchase qualified replacement property within a specific time period. The election to defer is made on the tax return for the year in which the involuntary conversion occurred.