An involuntary conversion involves the forced disposition of property in exchange for a payment. For example, a house may be condemned by the local government because a highway is to be built through the property. If the owner recognizes a gain on the difference between the compensation received and the adjusted basis of the lost property, the taxpayer must recognize this as a capital gain. The gain can be deferred if the taxpayer uses the proceeds to acquire a more expensive replacement property. In this case, the gain is deferred until the replacement property is later sold or exchanged. If there is a loss on an involuntary conversion, the taxpayer can recognize it at once. This gain or loss rule does not apply when the property is the taxpayer's main home.