Valarie purchases a rental house and land for $180,000 during a depressed real estate market. Appraisals place the value of the house at $140,000 and the land at $60,000 (a total of $200,000). What is Valarie's basis in the house?

Question

Quizplus · Accepted Answer

Valarie's basis in the house is calculated by allocating the purchase price based on the appraised values. The house's appraised value is 70% of the total appraised value ($140,000/$200,000). Therefore, her basis in the house is 70% of the purchase price: $180,000 * 70% = $126,000.

Valarie Purchases a Rental House and Land for $180,000 During