Question

Arianna's personal residence has an adjusted basis of $254,250 and a fair market value of $228,825. arianna converts the personal residence to rental property. what is arianna's gain basis? what is her loss basis?

Answer 1

Arianna's gain basis for the rental property conversion is $254,250, and her loss basis is $228,825. The gain basis is the home's adjusted basis, while the loss basis is the fair market value at the time of conversion.

Step-by-step explanation:

Arianna's gain basis and loss basis for converting her personal residence to a rental property are determined based on the adjusted basis and the fair market value of the property at the time of conversion. When a personal residence is converted to rental property, the basis for calculating a gain is the property's adjusted basis, and the basis for calculating a loss is the property's fair market value at the time of conversion.

In Arianna's case, the adjusted basis of her residence is $254,250, and the fair market value is $228,825. Therefore, her gain basis is $254,250, and her loss basis is $228,825. If she were to sell the property at a future date, and it sold for more than the gain basis, she would calculate her taxable gain using the higher adjusted basis. Conversely, if the property sold for less than the loss basis, she would use the lower fair market value to calculate the deductible loss.

Answer 2

Arianna's gain basis is $228,825 and her loss basis is $254,250.

Step-by-step explanation:

When Arianna converts her personal residence to rental property, her gain basis and loss basis are determined based on the adjusted basis and fair market value of the property.

For the gain basis, the lower of the adjusted basis or fair market value is taken into consideration. In this case, the fair market value of $228,825 is lower than the adjusted basis of $254,250. Therefore, Arianna's gain basis would be $228,825.

For the loss basis, the higher of the adjusted basis or fair market value is taken into account. In this case, the adjusted basis of $254,250 is higher than the fair market value of $228,825. Therefore, Arianna's loss basis would be $254,250.

The gain basis represents the maximum amount of gain that Arianna can realize if she sells the rental property for a higher price in the future.

The loss basis represents the maximum amount of loss that Arianna can deduct if she sells the rental property for a lower price in the future.

It's important to note that the gain or loss basis is used for tax purposes and may be subject to further adjustments or calculations based on specific tax rules and regulations.

Consulting a tax professional or accountant would be advisable for accurate and personalized advice regarding Arianna's specific situation