If Personal Use Property Is Converted to Business Use

question 115

Multiple Choice

If personal use property is converted to business use:

• A)Gain is recognized on the date of conversion to the extent of the excess of the fair market value over the adjusted basis.
• B)Loss is recognized on the date of conversion to the extent of the excess of the adjusted basis over the fair market value.
• C)The basis for gain is the lower of the taxpayer's adjusted basis or the fair market value at the date of conversion.
• D)The basis for loss is the taxpayer's adjusted basis on the date of conversion.
• E)None of the above is correct.

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Definitions:

Calendar Year

A period of one year that begins on January 1 and ends on December 31, used as an accounting period by many businesses.

Accounting Cycle

The complete series of accounting steps taken throughout the period until the financial statements are prepared, including transactions, journal entries, trial balance, and financial reporting.

Office Supplies

Items such as pens, paper, calculators, and other materials used in an office setting for daily operations.

Acquisition

The process by which one company purchases most or all of another company's shares to gain control of that company.