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18 May, 04:51

On July 16, 2019, Logan acquires land and a building for $500,000 to use in his sole proprietorship. Of the purchase price, $400,000 is allocated to the building, and $100,000 is allocated to the land. Cost recovery of $4,708 is deducted in 2019 for the building (nonresidential real estate).

Required:

a. What is the adjusted basis for the land and the building at the acquisition date? b. What is the adjusted basis for the land and the building at the end of 2019?

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Answers (1)
  1. 18 May, 06:41
    0
    Answer and Explanation:

    The computation is shown below:

    a) The adjusted basis for the land and the building at the acquisition date is

    Land = $100,000

    Building = $400,000

    We recognized the purchase price of land and building

    b. And, the adjusted basis for the land and the building at the end of 2019 is

    Land = $100,000

    Building is

    = $400,000 - $4,708

    = $395,292

    We considered the cost recovery for the computation above
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