Monterey Developers purchases 10 acres of land for $15,000 on January 14, 2014. 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 2014. Monterey also pays $800 in property taxes in 2014. What is Monterey's adjusted basis in the land at the end of 2014?

Question

Quizplus · Accepted Answer

The adjusted basis includes the purchase price, legal and other fees related to the purchase, costs to subdivide the land, and costs for easements. Thus, $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