Question

Nancy gives her niece a crane to use in her business with a fair market value of $61,000 and a basis in Nancy's hands of $80,000. No gift tax was paid. What is the niece's basis for depreciation (cost recovery)?

a. $0
b. $19,000
c. $61,000
d. $80,000
e. None of the above

Answer 1

The niece's basis for depreciation (cost recovery) would be $61,000.

Step-by-step explanation:

The niece's basis for depreciation (cost recovery) would be the lower of the fair market value or Nancy's basis in the crane. In this case, the fair market value is $61,000 and Nancy's basis is $80,000. Since the fair market value is lower, the niece's basis for depreciation would be $61,000.