Question

1. Explain the functional-use test.

2. Explain the taxpayer-use test.

(Don't get the answer elsewhere.)

Answer 1

Functional-use test

To get qualify for non-recognition of gain due to the involuntary conversion and the taxpayer must acquire qualified replacement property. There are some exceptions to the replacement property and that must be "similar or related in service or use to the property so converted."

Tax - Payer use test

The taxpayer-use test is less restrictive and which allows the owner of converted property that is leased or rented to others to replace the converted property with property that can also be leased or rented.