Question

Determine the treatment of a loss on rental property under the following facts: Basis $650,000 FMV before the loss 800,000 FMV after the loss 200,000

Answer 1

$600,000

Step-by-step explanation:

The loss on the rental property in the given question will be lower of the following two limits:

1. Decline in FMV of the property

2.Basis amount

Decline in FMV of the property=FMV before the loss-FMV after the loss

=800,000-200,000

=$600,000

Basis=$650,000

So based on the above discussion, the loss in the given scenario shall be $600,000