Final answer:
The statement is true; gain from an involuntary conversion can be deferred if replacement property is acquired within the specified time. The Internal Revenue Code provides this provision to avoid immediate tax burden, given that qualifying replacement property is purchased within two to three years.
Step-by-step explanation:
The statement that all or part of the gain realized on an involuntary conversion is deferred but not permanently excluded if qualifying replacement property is acquired within the requisite period of time is true. An involuntary conversion occurs when property is destroyed, stolen, condemned, or disposed of under the threat of condemnation and the insurance or compensation received exceeds the property's adjusted basis. To defer recognition of this gain on one's tax return, the Internal Revenue Code permits taxpayers to reinvest the proceeds into similar property within a certain time frame. Normally, the period to acquire replacement property is two years for personal property and up to three years for property associated with a business or trade. If the replacement property costs at least as much as the payment received from the involuntary conversion, the gain can be deferred.