MGMT 504 - Kelsey Doddridge MGMT 504 Homework 4 November 9...

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Kelsey Doddridge MGMT 504 Homework 4 November 9, 2010 1. A. Alex’s initial basis in the automobile is $9000 because that’s how much the vehicle was worth on the date of conversion to the business use. If Alex were to use the automobile for business from the time he bought it, his basis would be the full $25000 but since he started out using it for personal use then switched to business, he can only deduct the fair market value on the date of conversion. B. His basis for computing depreciation is $9000. He has to use the fair market value of the vehicle today, not what it initially cost him. This is because the vehicle was converted to business use and not used initially for business purposes. 2. A. FMV-Date of conversion $9000 3 yrs later-sales price - $4000 loss of $(5000) + depreciation $3600 Total loss $ 1400 B. FMV-Date of conversion $9000 3 yrs later-sales price $23000 Gain of $14000 +Depreciation $ 3600 Total gain $17600 C. FMV-date of conversion $9000 3 yrs later-sales price
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This note was uploaded on 01/31/2011 for the course MGMT 504 taught by Professor Hatcher during the Spring '08 term at Purdue.

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MGMT 504 - Kelsey Doddridge MGMT 504 Homework 4 November 9...

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