The taxpayer elects to defer the gain from a qualified involuntary conversation. The taxpayer must report a recognized gain equal to:

The lower of the realized gain or the excess of the proceeds from the conversion over the cost of the replacement property. The excess of the proceeds from the conversation over the basis in the original property. The greater of the realized gain or the excess of the proceeds from the conversion over the cost of the replacement property. Zero since the taxpayer elected to defer the gain.