TO: Instructor FROM: Student DATE: January 6, 2022 The purpose of this e-mail is to address the tax issues associated with Surendra's conversion of his principal residence into a rental property. I am basing my conclusions on the information provided. The original cost (and adjusted basis at the time of the conversion) of Surendra's house was $340,000. Under 5 165 and the Regulations, when a personal use asset is converted to a business or income-producing asset, the basis of the rental property carry over from the personal use adjusted basis. Similar to property received by gift, the basis depends on the ultimate disposition of the property as either a gain or a loss. If al the basis is the lower of the fair market value on the date of the conversion or the carryover adjusted basis. If the property were ultimately sold at a the basis is the adjusted basis at the time of the conversion. In Surendra's case, her gain basis is $ and loss basis is $ The conversion to business property requires that the property reflect ( once placed in service. This requires that a depreciable basis be determined prior to the ultimate disposition of the property. Under § 167 and the Regulations, the depreciable basis, in Surendra's case, is $ Unless Surendra is able to sell the property for a gain, the realized loss incurred before the conversion will Surendra will be to recognize the loss if he sells the home rather than converting it to business or income- producing use because losses on personal use assets are generally Thank you for asking me to address these topics. Surendra's personal residence originally cost $340,000 (ignoring the value of the land). After living in the house for five years, he converts it to rental property. At the date of conversion, the fair market value of the house is $320,000. a. Surendra's basis for loss for the rental property is s 32,000 b. Surendra's basis for depreciation for the rental property is $ c. Surendra's basis for gain for the rental property is $ d. Could Surendra have obtained better tax results if he had sold his personal residence for $320,000 and then purchased another house for $320,000 to hold as rental property? No, because his basis in his personal residence would become his basis in the rental property. e. Complete the letter below regarding an e-mail to your instructor. TO: Instructor 320,000 340,000 FROM: Student DATE: January 6, 2022 The purpose of this e-mail is to address the tax issues associated with Surendra's conversion of his principal residence into a rental property. I am basing my conclusions on the information provided. The original cost (and adjusted basis at the time of the conversion) of Surendra's house was $340,000. Under $165 and the
TO: Instructor FROM: Student DATE: January 6, 2022 The purpose of this e-mail is to address the tax issues associated with Surendra's conversion of his principal residence into a rental property. I am basing my conclusions on the information provided. The original cost (and adjusted basis at the time of the conversion) of Surendra's house was $340,000. Under 5 165 and the Regulations, when a personal use asset is converted to a business or income-producing asset, the basis of the rental property carry over from the personal use adjusted basis. Similar to property received by gift, the basis depends on the ultimate disposition of the property as either a gain or a loss. If al the basis is the lower of the fair market value on the date of the conversion or the carryover adjusted basis. If the property were ultimately sold at a the basis is the adjusted basis at the time of the conversion. In Surendra's case, her gain basis is $ and loss basis is $ The conversion to business property requires that the property reflect ( once placed in service. This requires that a depreciable basis be determined prior to the ultimate disposition of the property. Under § 167 and the Regulations, the depreciable basis, in Surendra's case, is $ Unless Surendra is able to sell the property for a gain, the realized loss incurred before the conversion will Surendra will be to recognize the loss if he sells the home rather than converting it to business or income- producing use because losses on personal use assets are generally Thank you for asking me to address these topics. Surendra's personal residence originally cost $340,000 (ignoring the value of the land). After living in the house for five years, he converts it to rental property. At the date of conversion, the fair market value of the house is $320,000. a. Surendra's basis for loss for the rental property is s 32,000 b. Surendra's basis for depreciation for the rental property is $ c. Surendra's basis for gain for the rental property is $ d. Could Surendra have obtained better tax results if he had sold his personal residence for $320,000 and then purchased another house for $320,000 to hold as rental property? No, because his basis in his personal residence would become his basis in the rental property. e. Complete the letter below regarding an e-mail to your instructor. TO: Instructor 320,000 340,000 FROM: Student DATE: January 6, 2022 The purpose of this e-mail is to address the tax issues associated with Surendra's conversion of his principal residence into a rental property. I am basing my conclusions on the information provided. The original cost (and adjusted basis at the time of the conversion) of Surendra's house was $340,000. Under $165 and the
Chapter13: Property Transactions: Determination Of Gain Or Loss, Basis Considerations, And Nonta Xable Exchanges
Section: Chapter Questions
Problem 67P
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Question
Transcribed Image Text:TO: Instructor
FROM: Student
DATE: January 6, 2022
The purpose of this e-mail is to address the tax issues associated with Surendra's conversion of his principal residence into a
rental property. I am basing my conclusions on the information provided.
The original cost (and adjusted basis at the time of the conversion) of Surendra's house was $340,000. Under 5 165 and the
Regulations, when a personal use asset is converted to a business or income-producing asset, the basis of the rental property
carry over from the personal use adjusted basis. Similar to property received by gift, the basis depends on
the ultimate disposition of the property as either a gain or a loss. If al
the basis is the lower of the fair
market value on the date of the conversion or the carryover adjusted basis. If the property were ultimately sold at a
the basis is the adjusted basis at the time of the conversion. In Surendra's case, her gain basis is $
and loss basis is $
The conversion to business property requires that the property reflect (
once placed in service. This requires
that a depreciable basis be determined prior to the ultimate disposition of the property. Under § 167 and the Regulations, the
depreciable basis, in Surendra's case, is $
Unless Surendra is able to sell the property for a gain, the realized loss incurred before the conversion will
Surendra will be
to recognize the loss if he sells the home rather than converting it to business or income-
producing use because losses on personal use assets are generally
Thank you for asking me to address these topics.
Transcribed Image Text:Surendra's personal residence originally cost $340,000 (ignoring the value of the land). After living in the house for five years, he converts
it to rental property. At the date of conversion, the fair market value of the house is $320,000.
a. Surendra's basis for loss for the rental property is s
32,000
b. Surendra's basis for depreciation for the rental property is $
c. Surendra's basis for gain for the rental property is $
d. Could Surendra have obtained better tax results if he had sold his personal residence for $320,000 and then purchased another house
for $320,000 to hold as rental property?
No, because his basis in his personal residence would become his basis in the rental property.
e. Complete the letter below regarding an e-mail to your instructor.
TO:
Instructor
320,000
340,000
FROM: Student
DATE: January 6, 2022
The purpose of this e-mail is to address the tax issues associated with Surendra's conversion of his principal residence into a
rental property. I am basing my conclusions on the information provided.
The original cost (and adjusted basis at the time of the conversion) of Surendra's house was $340,000. Under $165 and the
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