Silver Corporation receives $1 million in cash from Madison County as an inducement to expand its operations there.
Within one year, Silver spends $1.5 million to enlarge its existing plant. Silver Corporation's basis in the expansion is
$500,000.

Question

Quizplus · Accepted Answer

Silver Corporation's basis in the expansion is $1.5 million because the basis of property is generally its cost, and inducement payments received do not reduce the basis of the property acquired or constructed.

Silver Corporation Receives $1 Million in Cash from Madison County