Involuntary Conversion

A process where a taxpayer is involuntarily forced to dispose of property that has been stolen, condemned, destroyed or repossessed, and another piece of property or cash is received in lieu of the property. Involuntary conversion can result in a possible gain or loss to the taxpayer, as long as the property was not the taxpayer's main home.

No loss can be deducted if the involuntary conversion is a result of casualty or theft.

If the taxpayer receives insurance or other remuneration for lost property that is worth more than the property's adjusted basis (and is not the taxpayers main home), then the difference between the two amounts must be reported as a capital gain. This gain may be deferred if the taxpayer elects to use the proceeds to acquire replacement property that is worth at least as much as the property that was lost.

Investment dictionary. . 2012.

Look at other dictionaries:

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  • Replacement Property — Any property that is received as a replacement for property that was lost as a result of an involuntary conversion, such as theft. Replacement property can be either personal or business property and can include real estate, machinery and… …   Investment dictionary

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