Question

Brittany started a law practice as a sole proprietor. She owned a computer, printer, desk, and file cabinet she purchased during law school (several years ago) that she is planning to use in her business. What is the depreciable basis that Brittany should use in her business for each asset, given the following information?

Asset Purchase Price FMV at Time Converted to Business use
Computer $2,500 $800
Printer $300 $150
Desk $1,200 $1,000
File cabinet $200 $225

Answer 1

For tax purposes, assets that are converted to business use from personal, should use the lesser of the Fair Market Value (FMV) at the time of conversion or the cost of the asset.

Computer.

The FMV is less than the purchase price so the depreciable basis is:

= $800

Printer

The FMV is less than the purchase price so the depreciable basis is:

= $150

Desk

The FMV is less than the purchase price so the depreciable basis is:

= $1,000

File Cabinet

The purchase price is less than the FMV so the depreciable basis is:

= $200