Monterey Developers purchases 10 acres of land for $15,000 on January 14, 2018. 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 2018. Monterey also pays $800 in property taxes in 2018. What is Monterey's adjusted basis in the land at the end of 2018?

Question

Quizplus · Accepted Answer

The adjusted basis in the land at the end of 2018 is calculated by adding the purchase price of the land ($15,000) to the legal and other fees related to the purchase ($2,000), the costs for legal fees, permit licenses, and city franchise fees to subdivide the land ($3,000), and the cost for sewer and utility line easements ($5,000). This totals $25,000. Interest paid on the loan and property taxes are not added to the basis of the land.

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