Douglas bought office furniture two years and four months ago for $25,000 to use in his business and elected to expense all of it under Sec. 179. Depreciation of $3,500 would have been taken under the MACRS rules. If Douglas converts the furniture to nonbusiness use today, Douglas must

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The furniture was expensed under Sec. 179, so the full $25,000 was deducted in the year of purchase. When the furniture is converted to nonbusiness use, the taxpayer must include the lesser of the fair market value or the adjusted basis in gross income. The adjusted basis is $0, so the taxpayer must include $21,500 in gross income in the year of conversion.

Douglas Bought Office Furniture Two Years and Four Months Ago