Josh purchases a personal residence for $278,000 but subsequently converts the property to rental property when its FMV is $275,000.Assume depreciation of $65,000 has been deducted after conversion to rental use.If Josh sells the property for $280,000,his gain or loss will be
A)$2,000 gain.
B)$5,000 gain.
C)$67,000 gain.
D)$70,000 gain.

Question

Quizplus · Accepted Answer

The gain is calculated as the selling price ($280,000) minus the adjusted basis. The adjusted basis is the original purchase price ($278,000) minus depreciation ($65,000), which equals $213,000. Therefore, the gain is $280,000 - $213,000 = $67,000.

Josh Purchases a Personal Residence for $278,000 but Subsequently Converts