The Basis for a Personal-Use Asset Converted to Business Use

question 121

True/False

The basis for a personal-use asset converted to business use is the lesser of the asset's cost basis or fair market value on the date of the transfer or conversion.

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Definitions:

Operating Leverage

A measure of how revenue growth translates into growth in operating income, influenced by the proportion of fixed costs in total costs.

Net Operating Income

Income produced by a firm's regular activities, not including taxes and interest.

Sales Increase

The rise in the quantity or volume of products sold or revenue generated over a specific period.

Variable Expenses

Costs that vary in direct proportion to changes in the level of production or sales volume, such as materials or sales commissions.