On July 16, 2019, Logan acquires land and a building for $500,000 to use in his sole proprietorship. Of the purchase price, $400,000 is allocated to the building, and $100,000 is allocated to the land. Cost recovery of $4,708 is deducted in 2019 for the building (nonresidential real estate).
Required:
a. What is the adjusted basis for the land and the building at the acquisition date?b. What is the adjusted basis for the land and the building at the end of 2019?

Answer and Explanation:

The computation is shown below:

a) The adjusted basis for the land and the building at the acquisition date is

Land = $100,000

Building = $400,000

We recognized the purchase price of land and building

b. And, the adjusted basis for the land and the building at the end of 2019 is

Land = $100,000

Building is

= $400,000 - $4,708

= $395,292

We considered the cost recovery   for the computation above

the answer would be voluntary exchange -

"the act of buyers and sellers freely and willingly engaging in market transactions. moreover, transactions are made in such a way that both the buyer and the seller are better off after the exchange than before it occurred."

hope this : )

-shy

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