Valarie purchases a rental house and land for $180,000 during a depressed real estate market.Appraisals place the value of the house at $140,000 and the land at $60,000 (a total of $200,000).What is Valarie's basis in the house?

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Quizplus · Accepted Answer

Valarie's basis in the property is the amount she paid for it, which is $180,000. Since the house is appraised at $140,000, her basis in the house portion of the property is $140,000 multiplied by the ratio of the house value to the total property value (140,000/200,000), which equals $98,000. Therefore, her basis in the house is $98,000, and her basis in the land would be $82,000 ($180,000 - $98,000).

Valarie Purchases a Rental House and Land for $180,000 During