On January 2, 2019, Todd Converts His House into a Rental

question 56

Multiple Choice

On January 2, 2019, Todd converts his house into a rental property.Todd's basis in the house is $400,000, and its fair market value on the date of conversion is $376,000.What is Todd's basis for purposes of MACRS cost recovery?

• A)$0; because it was converted from personal use, it cannot be depreciated.
• B)$376,000.
• C)$388,000.
• D)$400,000.

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Definitions:

Operating Leverage

A financial metric that indicates how a company's operating income reacts to a change in sales volume, showing the degree of fixed versus variable costs.

Sales Increase

A rise in the amount of goods or services sold, often measured as a percentage increase over a previous period.

Contribution Format

A method of income statement presentation that stresses the contribution margin, which is sales revenue minus variable costs.

Income Statement

A financial statement that shows a company’s revenues and expenses over a specific period, resulting in net profit or loss.