Converting property for business use means fixing a basis for depreciation

When personal-use property is converted to business use, an allowance for depreciation is based on the lesser of the property’s fair market value or adjusted basis on the date of conversion. As the Tax Court pointed out in a recent case, a guestimate of value or basis won’t do. “A taxpayer must substantiate the property’s depreciable basis by showing its cost, its useful life, and any previously allowed or allowable depreciation.” #IdeaoftheDay