Question

Regarding involuntary conversion, which of the following statements is correct?

A) Involuntary conversion can include voluntary acts, such as a taxpayer destroying their own property by arson.
B) Involuntary conversion only applies to natural disasters.
C) Involuntary conversion is limited to situations beyond the taxpayer's control.
D) Involuntary conversion is not a recognized concept in tax law.

Answer 1

Involuntary conversion pertains to situations where the taxpayer's property is destroyed, stolen, or condemned in a manner beyond their control, and does not include voluntary acts. The correct answer is option C

Step-by-step explanation:

Regarding the question on involuntary conversion, the correct statement is C) Involuntary conversion is limited to situations beyond the taxpayer's control. Involuntary conversion refers to a situation where property is destroyed, stolen, condemned, or disposed of under the threat of condemnation and is replaced with similar property.

Essentially, it is a compulsory transaction rather than a voluntary one. The term specifically excludes voluntary acts like arson. It includes not only natural disasters but also events such as theft or eminent domain. The correct answer is option C