Question

Arianna's personal residence has an adjusted basis of $308,150 and a fair market value of $277,335. Arianna converts the personal residence to rental property. What is Arianna's gain basis? What is her loss basis? Arianna's basis for gain is $ and her basis for loss is $

Answer 1

Arianna's basis for loss $277,335

Arianna's basis for gain $308,,150

Step-by-step explanation:

Calculation for Arianna's gain basis and loss basis

Since the original basis for loss on personal use assets that is been converted to either the business or the income producing use is the lower or lesser of the property's adjusted basis or fair market value on the date of conversion which means that the gain basis for the converted property will tend to be the property's adjusted basis on the date of conversion.

Arianna's basis for loss will be $277,335 (lower of $308,150 adjusted basis and fair market value of $277,335).

The amount of $30,815 that was been decline in value is a personal loss whichncan never be recognized for tax purposes this means that Arianna's basis for gain is $308,,150 (adjusted basis).