Involuntary Conversion

Business, Legal & Accounting Glossary

Definition: Involuntary Conversion




Full Definition of Involuntary Conversion


Per the Internal Revenue Service, “An involuntary conversion occurs when your property is destroyed, stolen, condemned, or disposed of under the threat of condemnation and you receive other property or money in payment, such as insurance or a condemnation award. Involuntary conversions are also called involuntary exchanges.”

Accounting treatment: Reporting of Gain or Loss on Involuntary Conversion

Per the IRS, “Gain or loss from an involuntary conversion of your property is usually recognized for tax purposes unless the property is your main home. You report the gain or deduct the loss on your tax return for the year you realize it. (You cannot deduct a loss from an involuntary conversion of property you held for personal use unless the loss resulted from a casualty or theft.)

However, depending on the type of property you receive, you may not have to report a gain on an involuntary conversion. You do not report the gain if you receive property that is similar or related in service or use to the converted property. Your basis for the new property is the same as your basis for the converted property. The gain on the involuntary conversion is deferred until a taxable sale or exchange occurs.”


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Involuntary Conversion. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. September 16, 2021 https://payrollheaven.com/define/involuntary-conversion/.
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Involuntary Conversion. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. https://payrollheaven.com/define/involuntary-conversion/ (accessed: September 16, 2021).
American Psychological Association (APA):
Involuntary Conversion. PayrollHeaven.com. Retrieved September 16, 2021, from PayrollHeaven.com website: https://payrollheaven.com/define/involuntary-conversion/

Definition Sources


Definitions for Involuntary Conversion are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 24th April, 2020 | 0 Views.