Gene purchased for $45,000 an SUV that he uses 100% for personal purposes.When the SUV is worth $30,000, he contributes it to his business.The gain basis is $45,000, the loss basis is $30,000, and the basis for cost recovery is
$45,000.

Question

Quizplus · Accepted Answer

When Gene contributes the SUV to his business, the basis for cost recovery is the lower of the asset's fair market value at the time of contribution ($30,000) or its original cost ($45,000). Therefore, the basis for cost recovery is $30,000, not $45,000.

Gene Purchased for $45,000 an SUV That He Uses 100