On January 2, 2019, Todd converts his house into a rental property.Todd's basis in the house is $400,000, and its fair market value on the date of conversion is $376,000.What is Todd's basis for purposes of MACRS cost recovery?
A)$0; because it was converted from personal use, it cannot be depreciated.
B)$376,000.
C)$388,000.
D)$400,000.

Question

Quizplus · Accepted Answer

For MACRS cost recovery purposes, when property is converted from personal use to business or income-producing use, the basis for depreciation is the lower of the property's adjusted basis or its fair market value at the time of conversion. In Todd's case, this is $376,000, the fair market value on the date of conversion.

On January 2, 2019, Todd Converts His House into a Rental