Carlton purchases land for $300,000.He incurs legal fees of $5,000 associated with the purchase.He subsequently incurs additional legal fees of $20,000 in having the land rezoned from agricultural to residential.He subdivides the land and installs streets and sewers at a cost of $600,000.What is Carlton's basis for the land and the improvements?

Question

Quizplus · Accepted Answer

Carlton's basis for the land will be its purchase price plus any associated legal fees, which is $305,000 ($300,000 + $5,000).
His basis for the improvements will be the cost of installing streets and sewers which is $600,000.
Therefore, Carlton's total basis is $925,000 ($305,000 + $600,000).

Carlton Purchases Land for $300,000