Final answer:
The cost recovery basis for property converted from personal to business use is the lesser of the adjusted basis or fair market value at conversion, not always the fair market value. Additionally, in a proprietary colony, Proprietors had several responsibilities beyond just collecting profits.
Step-by-step explanation:
The statement that the cost recovery basis for property converted from personal use to business use is always the fair market value at the time of the conversion is false. The cost recovery basis, also known as the adjusted basis for depreciation, for property converted from personal to business use is the lesser of the property's adjusted basis or its fair market value at the date of conversion.
In a proprietary colony, it is false that Proprietors have no responsibilities except to collect profits. Proprietors had various obligations including the development of the colony, the establishment of a government, and maintenance of the lands. They were typically responsible for recruiting settlers, managing colonial affairs, and potentially defending the colony if necessary, among other duties.