Monterey Developers purchases 10 acres of land for $15,000 on January 14,2016.They also pay $2,000 in legal and other fees related to the purchase.Monterey spends $3,000 for legal fees,permit licenses,and city franchise fees to subdivide the land into 10 one-acre plots.Sewer and utility line easements cost an additional $5,000.Interest paid on the loan that financed the purchase is $1,200 for 2016.Monterey also pays $800 in property taxes in 2016.What is Monterey's adjusted basis in the land at the end of 2016?

Question

Quizplus · Accepted Answer

The adjusted basis in the land includes the purchase price, legal and other fees related to the purchase, costs to subdivide the land, and costs for sewer and utility line easements. Therefore, the adjusted basis is $15,000 + $2,000 + $3,000 + $5,000 = $25,000. Interest and property taxes are not included in the basis.

Monterey Developers Purchases 10 Acres of Land for $15,000 on January