Question 3 - Answer the follow:

On an involuntary conversion in which the taxpayer does not buy replacement property within the replacement period, the gain on the involuntary conversion and any tax due must be reported:

A - In the year the replacement period expires.

B - In the year the involuntary conversion occurred.

C - Never, because the tax year of the conversion would be closed.

D - As soon as the taxpayer knows replacement property will not be purchased.

With an involuntary conversion, what is the time limit to purchase replacement property?

A - Two years from the conversion event.

B - It ends two years after the close of the taxable year the gain is realized.

C - There is no time limit.

D - Five years from the conversion event.