Question

Abby's home had a basis of $360,000 ($160,000 attributable to the land) and a fair market value of $340,000 ($155,000 attributable to the land) when she converted 70% of it to business use by opening a bed-and-breakfast. Four years after the conversion, Abby sells the home for $500,000 ($165,000 attributable to the land).

Calculate Abby's basis for gain, loss, and cost recovery for the portion of her personal residence that was converted to business use.

Answer 1

Abby's basis for gain = House-140000, Land-112000

Abby's basis for loss = House-129500, Land-108500

Cost recovery = House-129500, Land-0

Step-by-step explanation:

See attached picture.