# P3 defect 13: four devices two members contribute from personal use, each at the
# lower of its value and its basis.
id = "assets-four-contributed-devices"
title = "Each contributed device takes the lower of its value and its basis; gains and losses are per property"
rule = "Each item of contributed property is its own: depreciable basis is the lesser of its fair market value and the contributor's adjusted basis; its built-in gain or loss is its own, and gains and losses of different properties are never netted."
status = "CHOICE"
sources = [
  "Treas. Reg. §1.168(i)-4(b)(1)",
  "Treas. Reg. §1.704-3(a)(2): section 704(c) applies 'on a property-by-property basis'",
  "Treas. Reg. §1.704-3(a)(3)(ii)",
  "26 U.S.C. §704(c)(1)(C)",
  "DECISION D-41 (owner, 2026-10-20): the depreciable basis of contributed personal-use property is the lesser of its fair market value and the member's adjusted basis, the CPA to confirm (wanderbooks plan/served.md; rules.md B-25)",
]
tags = ["fixed-assets", "tax-basis", "partnerships", "704c"]

[setup]
currency = "USD"
fiscal_year_start = "01-01"
basis = "accrual"
rounding = "half-away-from-zero"

[[setup.accounts]]
code = "1500"
name = "Equipment"
type = "asset"

[[setup.accounts]]
code = "1510"
name = "Accumulated Depreciation"
type = "asset"

[[setup.accounts]]
code = "3000"
name = "Capital, Tobin Harlow"
type = "equity"

[[setup.accounts]]
code = "3001"
name = "Capital, Morgan Ellis"
type = "equity"

[[setup.accounts]]
code = "6200"
name = "Depreciation Expense"
type = "expense"

[[setup.members]]
name = "Tobin Harlow"
capital_account = "3000"
share = "0.5"

[[setup.members]]
name = "Morgan Ellis"
capital_account = "3001"
share = "0.5"

# Four devices the two members contribute jointly from personal use, each
# at its value. (Nothing rounds here.)
[[setup.assets]]
id = "laptop"
description = "Laptop"
cost = "1400.00"
salvage = "0.00"
life_months = 36
in_service = "2026-01-01"
method = "straight_line"
cost_account = "1500"
accumulated_account = "1510"
expense_account = "6200"
acquired_by = 1
basis = { rule = "personal_use_conversion", contributor_adjusted_basis = "1750.40", fmv_at_contribution = "1400.00", sec704c_method = "traditional" }

[[setup.assets]]
id = "phone"
description = "Phone"
cost = "900.00"
salvage = "0.00"
life_months = 36
in_service = "2026-01-01"
method = "straight_line"
cost_account = "1500"
accumulated_account = "1510"
expense_account = "6200"
acquired_by = 1
basis = { rule = "personal_use_conversion", contributor_adjusted_basis = "1129.99", fmv_at_contribution = "900.00", sec704c_method = "traditional" }

[[setup.assets]]
id = "camera"
description = "Camera"
cost = "1300.00"
salvage = "0.00"
life_months = 36
in_service = "2026-01-01"
method = "straight_line"
cost_account = "1500"
accumulated_account = "1510"
expense_account = "6200"
acquired_by = 1
basis = { rule = "personal_use_conversion", contributor_adjusted_basis = "1080.00", fmv_at_contribution = "1300.00", sec704c_method = "traditional" }

[[setup.assets]]
id = "monitor"
description = "Monitor"
cost = "500.00"
salvage = "0.00"
life_months = 36
in_service = "2026-01-01"
method = "straight_line"
cost_account = "1500"
accumulated_account = "1510"
expense_account = "6200"
acquired_by = 1
basis = { rule = "personal_use_conversion", contributor_adjusted_basis = "500.00", fmv_at_contribution = "500.00", sec704c_method = "traditional" }

[[events]]
date = "2026-01-01"
description = "Four devices contributed jointly"
lines = [
  { account = "1500", side = "debit", amount = "1400.00" },
  { account = "1500", side = "debit", amount = "900.00" },
  { account = "1500", side = "debit", amount = "1300.00" },
  { account = "1500", side = "debit", amount = "500.00" },
  { account = "3000", side = "credit", amount = "2050.00" },
  { account = "3001", side = "credit", amount = "2050.00" },
]

# Hand check, each device its own: the lesser of value and basis, and the
# value less the basis.
[[expect]]
query = "asset_basis"
asset = "laptop"
values = { tax_basis_723 = "1750.40", depreciable_basis = "1400.00", built_in_gain_704c = "-350.40", sec704c_1c = "true" }

[[expect]]
query = "asset_basis"
asset = "phone"
values = { tax_basis_723 = "1129.99", depreciable_basis = "900.00", built_in_gain_704c = "-229.99", sec704c_1c = "true" }

[[expect]]
query = "asset_basis"
asset = "camera"
values = { tax_basis_723 = "1080.00", depreciable_basis = "1080.00", built_in_gain_704c = "220.00", sec704c_1c = "false" }

[[expect]]
query = "asset_basis"
asset = "monitor"
values = { tax_basis_723 = "500.00", depreciable_basis = "500.00", built_in_gain_704c = "0.00", sec704c_1c = "false" }

# Totals: cost 1,400.00 + 900.00 + 1,300.00 + 500.00 = 4,100.00; §723
# 1,750.40 + 1,129.99 + 1,080.00 + 500.00 = 4,460.39; depreciable
# 1,400.00 + 900.00 + 1,080.00 + 500.00 = 3,880.00. The gains and losses
# are each property's own: the register totals none of them.
[[expect]]
query = "register_totals"
as_of = "2026-06-30"
values = { total_cost = "4100.00", total_tax_basis_723 = "4460.39", total_depreciable_basis = "3880.00", missing_basis = "0" }