Problem 13-66 (LO. 4) Surendra's personal residence originally cost $340,000 (ignoring the value of the land). After living in the house for five years, he converts it to rental property. At the date of conversion, the fair market value of the house is $320,000. a. Surendra's basis for loss for the rental property is $ b. Surendra's basis for depreciation for the rental property is $ c. Surendra's basis for gain for the rental property is $ d. Could Surendra have obtained better tax results if he had sold his personal residence for $320,000 and then purchased another house for $320,000 to hold as rental property? e. Complete the letter below regarding an e-mail to your instructor. TO: Instructor FROM: Student DATE: January 6, 2021 The purpose of this e-mail is to address the tax issues associated with Surendra's conversion of his principal residence into a rental property. I am basing my conclusions on the information provided. The original cost (and adjusted basis at the time of the conversion) of Surendra's house was $340,000. Under § 165 and the Regulations, when a personal use asset is converted to a business or income-producing asset, the basis of the rental property carry over from the personal use adjusted basis. Similar to property received by gift, the basis depends on the ultimate disposition of the property as either a gain or a loss. If a the basis is the lower of the fair market value on the date of the conversion or the carryover adjusted basis. If the property were ultimately sold at a the basis is the adjusted basis at the time of the conversion. In Surendra's case, her gain basis is $ and loss basis is $
Problem 13-66 (LO. 4) Surendra's personal residence originally cost $340,000 (ignoring the value of the land). After living in the house for five years, he converts it to rental property. At the date of conversion, the fair market value of the house is $320,000. a. Surendra's basis for loss for the rental property is $ b. Surendra's basis for depreciation for the rental property is $ c. Surendra's basis for gain for the rental property is $ d. Could Surendra have obtained better tax results if he had sold his personal residence for $320,000 and then purchased another house for $320,000 to hold as rental property? e. Complete the letter below regarding an e-mail to your instructor. TO: Instructor FROM: Student DATE: January 6, 2021 The purpose of this e-mail is to address the tax issues associated with Surendra's conversion of his principal residence into a rental property. I am basing my conclusions on the information provided. The original cost (and adjusted basis at the time of the conversion) of Surendra's house was $340,000. Under § 165 and the Regulations, when a personal use asset is converted to a business or income-producing asset, the basis of the rental property carry over from the personal use adjusted basis. Similar to property received by gift, the basis depends on the ultimate disposition of the property as either a gain or a loss. If a the basis is the lower of the fair market value on the date of the conversion or the carryover adjusted basis. If the property were ultimately sold at a the basis is the adjusted basis at the time of the conversion. In Surendra's case, her gain basis is $ and loss basis is $
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Problem 13-66 (LO. 4)
Surendra's personal residence originally cost $340,000 (ignoring the value of the land). After
living in the house for five years, he converts it to rental property. At the date of conversion,
the fair market value of the house is $320,000.
a. Surendra's basis for loss for the rental property is $
b. Surendra's basis for depreciation for the rental property is $
c. Surendra's basis for gain for the rental property is $
d. Could Surendra have obtained better tax results if he had sold his personal residence for
$320,000 and then purchased another house for $320,000 to hold as rental property?
e. Complete the letter below regarding an e-mail to your instructor.
TO:
Instructor
FROM: Student
DATE: January 6, 2021
The purpose of this e-mail is to address the tax issues associated with Surendra's
conversion of his principal residence into a rental property. I am basing my
conclusions on the information provided.
The original cost (and adjusted basis at the time of the conversion) of Surendra's
house was $340,000. Under § 165 and the Regulations, when a personal use asset is
converted to a business or income-producing asset, the basis of the rental property
carry over from the personal use adjusted basis. Similar to property
received by gift, the basis depends on the ultimate disposition of the property as
either a gain or a loss. If a
the basis is the lower of the fair market
value on the date of the conversion or the carryover adjusted basis. If the property
were ultimately sold at a
the basis is the adjusted basis at the time of
the conversion. In Surendra's case, her gain basis is $
and loss basis is $
Transcribed Image Text:The conversion to business property requires that the property reflect
once placed in service. This requires that a depreciable basis be determined prior to
the ultimate disposition of the property. Under § 167 and the Regulations, the
depreciable basis, in Surendra's case, is $
Unless Surendra is able to sell the property for a gain, the realized loss incurred before
the conversion will
Surendra will be
to recognize the loss
if he sells the home rather than converting it to business or income-producing use
because losses on personal use assets are generally
Thank you for asking me to address these topics.
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