Monterey Developers purchases 10 acres of land for $15,000 on January 14,2013.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 2013.Monterey also pays $800 in property taxes in 2013.What is Monterey's adjusted basis in the land at the end of 2013?

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 (purchase price) + $2,000 (legal fees) + $3,000 (subdivision costs) + $5,000 (easements) = $25,000. Interest and property taxes are not included in the basis.

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