Robert receives a car as a gift from his mother. The car's purchase price was $20,000, and it was used personally prior to the gift. Robert uses the car 80% of the time in his pizza business. The car's value at the date of the gift is $9,000. What is Robert's basis in the car for depreciation purposes?

Question

Quizplus · Accepted Answer

The basis for depreciation of a gift used in business is the lower of the donor's adjusted basis or the fair market value at the time of the gift, adjusted for the percentage of business use. Since the car's value at the time of the gift is $9,000 and it is used 80% for business, Robert's basis for depreciation is $9,000 * 80% = $7,200.

Robert Receives a Car as a Gift from His Mother