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Problem - Nicky receives a car from Sam as a gift. Sam paid $48,000 for the car. He had used it for business purposes and had deducted $10,000 for depreciation up to the time he gave the car to Nicky. The fair market value of the car is $33,000.
Required -
a. Assuming that Nicky uses the car for business purposes, what is her basis for depreciation?
b. Assume that Nicky deducts depreciation of $6,500 and then sells the car for $32,500. What is her recognized gain or loss?
c. Assume that Nicky deducts depreciation of $6,500 and then sells the car for $20,000. What is her recognized gain or loss?
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