Which of the Following Statements Regarding Home-Related Transactions Is Correct

question 41

Multiple Choice

Which of the following statements regarding home-related transactions is correct?

• A) If a taxpayer converts a home from personal use to rental use, the basis of the rental property is the greater of the basis of the property at the time of the conversion or the fair market value of the property at the time of the conversion.
• B) If a taxpayer uses a residence as a rental property (and deducts depreciation expense against the basis of the property) and as a personal residence the taxpayer will not be allowed to exclude the entire amount of gain even if the taxpayer otherwise meets the ownership and use tests and the amount of the gain is less than the limit on excludable gain.
• C) If a taxpayer converts a rental home to a principal residence, the taxpayer's basis in the principal residence is the greater of the basis of the home at the time of the conversion or the fair market value at the time of the conversion.
• D) None of these statements are correct.

---

Definitions:

Tranquilizer

A class of psychoactive drugs used to reduce tension or anxiety without inducing sleep.

Obsessive-Compulsive Disorder

A mental disorder characterized by recurrent, unwanted thoughts (obsessions) and/or repetitive behaviors (compulsions) that the person feels the urge to perform in response to an obsession.

Antidepressant Drugs

Medications designed to improve symptoms of depression by altering chemical balances within the brain.

Effective

Achieving a desired goal or result in an efficient and impactful manner.