Question

The basis of personal use property converted to business use is:

a.Always the lower of its adjusted basis or fair market value on the date of conversion.

b.Always its adjusted basis on the date of conversion.

c.Always its fair market value on the date of conversion.

d.Always the higher of its adjusted basis or fair market value on the date of conversion.

e.None of these.

Answer 1

The basis of personal use property converted to business use is:

The correct option is:

e) non of the above

explanation:

When property is converted from personal use to business or income-producing use, then the basis for loss on the converted assets is the lower of the property's adjusted basis or it's fair market value on the date of conversion. However, the gain basis remains the property's adjusted basis on the conversion date, because gain is always recognized whether the property is personal, business, or investment related.