Conversion of capital asset to stock-in-trade — capital gain:
AYear of conversion at FMV; taxable in year of sale of stock
BYear of sale of stock at sale price (per relevant Section)
CYear of receipt
DNever
Answer & Solution
Correct answer: A. Year of conversion at FMV; taxable in year of sale of stock
1. Section 45(2) treats conversion as transfer under Section 2(47).
2. FMV on date of conversion is full value of consideration; CG computed accordingly.
3. CG taxable in the year stock-in-trade is sold.
_Source: ICAI BoS CA Final Paper 7, Ch 4 "Capital Gains"_
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