Respuesta :
Jorge had a gain because the sales price was more than the basis after it was adjusted for depreciation "allowed or allowable." When Jorge converted the garage to use for his business, the value of the garage became part of the basis for tax purposes. The basis is the amount used to determine gain or loss when selling a property.
In this case, the basis of the garage was $12,000, excluding the land. However, Jorge was able to deduct depreciation expenses on the garage since he used it for his business. Depreciation is an annual deduction that accounts for the wear and tear of a property over time.
By the time Jorge sold the garage in December 2021, the adjusted basis (after deducting depreciation) may have been lower than the original $12,000. Therefore, even though he sold the garage for $11,000, the adjusted basis may have been lower, resulting in a gain.
It's important to note that Jorge had a gain for tax purposes, but he actually sold the garage at a loss. The gain is based on the adjusted basis for tax purposes, not the actual sale price.
To summarize, Jorge had a gain because the sales price was more than the adjusted basis after it was adjusted for depreciation "allowed or allowable." This is a common situation when converting a property from personal use to business use.
