Lynn purchases a house for $52,000.She converts the property to rental property when the fair market value is $115,000.After deducting depreciation (cost recovery) expense of $1,130, she sells the house for $120,000.What is her recognized gain or loss?
A)$0
B)$6,130
C)$37,630
D)$69,130

Question

Quizplus · Accepted Answer

The recognized gain is calculated as the selling price minus the adjusted basis. The adjusted basis is the original purchase price plus improvements minus depreciation. Here, the original purchase price is $52,000, and depreciation is $1,130, so the adjusted basis is $50,870. The gain is $120,000 (selling price) - $50,870 (adjusted basis) = $69,130.

Lynn Purchases a House for $52,000