Question

Marsha transfers her personal use automobile to her business (a sole proprietorship). The car's adjusted basis is $30,000, and the fair market value is $16,000. No cost recovery had been deducted by Marsha, since she held the car for personal use. Determine the adjusted basis of the car to Marsha's sole proprietorship, including the basis for cost recovery.

A)$0
B)$16,000
C)$30,000
D)$46,000

Answer 1

The adjusted basis of the car to Marsha's sole proprietorship would be $30,000.

Step-by-step explanation:

The adjusted basis of the car to Marsha's sole proprietorship would be $30,000. When Marsha transfers her personal use automobile to her business, the adjusted basis of the car carries over. In this case, the adjusted basis is $30,000 since no cost recovery had been deducted for personal use. The fair market value of $16,000 is not relevant for determining the adjusted basis.