Final answer:
The cost recovery basis for property converted from personal to business use is the lesser of the property's adjusted basis or its fair market value at the time of conversion, not always the fair market value. Thus, the statement in the question is false.
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 of the property at the time of the conversion is false. When converting a property from personal to business use, the basis for depreciation is the lesser of the property's adjusted basis or its fair market value at the time of conversion. The adjusted basis is generally the cost of the property, plus improvements and minus any depreciation (if applicable to personal use property).
For example, if you purchase a computer for personal use for $1,000 and over time, its fair market value becomes $700 at the time you start using it for business, the basis for depreciation would be $700. However, if the computer's fair market value was $1,200 at the time of conversion, the basis would still be $1,000 since it is a lesser amount. This method prevents taxpayers from claiming inflated depreciation deductions.