B purchased an old textile factory building in Chicago that had been certified as a historic structure.The purchase price was $1 million, and he spent $3 million this year renovating it.B's tax credit [without regard to possible limitations imposed by § 38(c)] and his basis in the building are

Question

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B is entitled to a rehab tax credit equal to 20% of the qualified rehabilitation expenditures (QREs) incurred in connection with the renovation of the historic building. In this case, B's QREs are $3 million, so his tax credit is $600,000 (20% of $3 million).

B's basis in the building is calculated as follows:
Purchase price: $1 million
Renovation costs: $3 million
Total basis: $4 million

Note that this calculation does not take into account any potential limitations imposed by § 38(c), which could reduce B's tax credit based on the amount of tax liability he has.

B Purchased an Old Textile Factory Building in Chicago That