James purchased land costing $22,000 in 2013. He paid $2,000 in legal fees and other expenses to complete the purchase. In 2014, James spends $24,000 subdividing the land and running utilities to the property. Interest paid on the loan used to finance the purchase and subdividing total $1,750 in 2013 and $3,200 in 2014. James paid $350 of property taxes in 2013 and $750 of property taxes in 2014. What is James's basis in the land at the end of 2014?

Question

Quizplus · Accepted Answer

James's basis in the land includes the purchase price, legal fees, and costs to subdivide and run utilities. Therefore, $22,000 (purchase price) + $2,000 (legal fees) + $24,000 (subdividing and utilities) = $48,000. Interest and property taxes are not included in the basis.

James Purchased Land Costing $22,000 in 2013