Involuntary Conversion

Condemnation or sudden destruction by nature.
Example: A property is taken by Eminent Domain for the purpose of constructing a public highway. This involuntary conversion of the property is contrasted with a sale that the owner enters into voluntarily.

Sudden loss of an asset that does not occur in the ordinary course of business, such as destruction by fire or condemnation by a governmental agency. The difference between the cash received from the insurance company and the carrying value of the destroyed asset (or portion thereof) represents a loss or gain for financial reporting purposes. Under the Internal Revenue Code, the loss on an involuntary conversion is recognized, but the gain is reflected only to the degree that the proceeds are not reinvested in similar property within two or three years subsequent to the conversion.