3) Bernice purchased land and a building for use in connection with her business

Question

3) Bernice purchased land and a building for use in connection with her business. The costs associated with this purchase were: Cash down payment $ 40,000 Mortgage on property 350,000 Survey costs 2,000 Title and transfer taxes 2,500 Charges for hookup of gas, water, and sewer lines 3,000 Seller-owed back property taxes paid by Bernice 5,000 What is Bernice's tax basis for the land and building?

a. $ 44,500

b. $394,500

c. $397,500

d. $402,500

Please just don't copy that one other answer already on here, I'm pretty sure it's wrong. Show all work as much as possible please, trying to understand the material.

Explanation / Answer

All cost which are incurred to bring an asset to its current condition usable in nature shall be cost of the land for tax basis.

1. cash 40000

2 mortagage 350000

3. Survey cost 2000

3. Title and transfer 2500

Total 394500

The rest cost shall not be considered given charges for gas etc is not a capital cost and taxes of seller paid by buyer cannot form part of his cost. It is sellers liability

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