On February 3 of the current year, Caroline converts her house to a rental property. Caroline's adjusted basis in the house is $120,000 and the fair market value is $150,000 on the date of conversion. What is Caroline's adjusted basis in the rental property for depreciation purposes?
A)$30,000
B)$120,000
C)$150,000
D)$170,000
E)$180,000

Question

Quizplus · Accepted Answer

For depreciation purposes, when converting personal property to rental property, the basis is the lower of the adjusted basis or the fair market value at the time of conversion. In this case, Caroline's adjusted basis ($120,000) is lower than the fair market value ($150,000), so her basis for depreciation is $120,000.

On February 3 of the Current Year, Caroline Converts Her