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Tammy owns a house that she has been living in for eight years. She purchased the house for $250,000 and the FMV today is $210,000.
Tammy owns a house that she has been living in for eight years. She purchased the house for $250,000 and the FMV today is $210,000. She is moving into her friend's house and has decided to convert her residence to rental property. Assume 40% of the property's value is allocated to land.
a. | What is the basis of the house for depreciation? |
b. | If she claims depreciation of $12,600 and sells the property six years later for$270,000 (40% allocated to land), determine the gain on the sale of the building and gain on the sale of the land. |
c. | How much of the gain is due to depreciation? |
d. | If the FMV is $290,000 when she converts the house to rental property instead of$210,000, what is the basis of the house for depreciation? |
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