Nevada Timeshare License Practice Exam

Which of the following actions would be considered conversion?

1. Holding the buyer's money in a trust account

2. Depositing the buyer's money and then using that account to pay the company bills

3. Returning the buyer's funds upon request

4. Keeping the funds separate from operational expenses

The correct answer is: Depositing the buyer's money and then using that account to pay the company bills

The action of depositing the buyer's money and then using that account to pay the company bills is considered conversion because it involves the misappropriation of funds. In this context, conversion refers to the unauthorized use or control of someone else's money or property. By using the buyer's funds for operational bills, the individual is treating the buyer's money as their own rather than maintaining it for its intended purpose, which is to hold it securely until it is lawfully disbursed to the seller or refunded to the buyer if necessary. In comparison, holding the buyer's money in a trust account is compliant with legal and ethical standards, as the funds are safeguarded for the specific purpose of fulfilling a contractual obligation. Returning the buyer's funds upon request is also a correct and legal action, demonstrating the proper handling of the buyer's money. Similarly, keeping those funds separate from operational expenses reflects responsible financial management and adheres to regulatory requirements.