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K owns office equipment that has been used for personal purposes since it was purchased last...

K owns office equipment that has been used for personal purposes since it was purchased last year for $1,600. During the current year K began using the equipment exclusively for his business. The equipment has a current value of $1,000. What is the equipment’s capital cost for tax purposes in the current year?

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Answer #1

Answer -

Step - (1) - Facts of the Case Given -

K owns office equipment that has been used for personal purposes since it was purchased last year for $1600.

During the current year K began using the equipment exclusively for his business. The equipment has a current value of $1000.

.

Step - (2) - Determination of the Equipment’s Capital cost for Tax Purposes in the Current year -

As per U.S. Internal Revenue Service, When Personal-use property converted to business use, the value assigned to the property will be the lower of :

  • The Fair market value at the time of the conversion, or
  • The Cost plus any additions or improvements, and minus any deducted casualty losses, up to the time of the conversion.

In the given case,

The Equipment’s Capital cost for Tax Purposes in the Current year = $1000 (that is the current value of office equipment).

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