Question

Wanting to finalize a sale before year-end, on December 29, WR Outfitters sold to Bob a warehouse and the land for $130,000. The appraised fair market value of the warehouse was $119,250, and the appraised value of the land was $123,750. (Do not round intermediate calculations. Round your final answers to the nearest whole dollar amount.)a. What is Bob’s basis in the warehouse______and in the land_______ b. What would be Bob’s basis in the warehouse and in the land if the appraised value of the warehouse was $94,250, and the appraised value of the land was $130,000? warehouse___________ and land _______ Which appraisal would Bob likely prefer? Appraised value in part (a) or Appraised value in part (b)

Answer 1

Wanting to finalize a sale before year-end,
on December 29, WR Outfitters sold to Bob a
warehouse and the land for $130,000.
The appraised Fair Market value was $119250
and appriased value of the land was $ 123750
Answer a			Amnt($)
Selling price Warehouse and Land			1,30,000
Appraised fair market value of Warehouse-a			1,19,250
Appraised fair market value of Land-b			1,23,750
Appraised fair market value Warehouse + Land(a+b)			2,43,000
Selling price Warehouse and Land			1,30,000
Appraised fair market value of Land			1,23,750
Cost basis of land			66,204	(123750/243000)*130000
Selling price Warehouse and Land			1,30,000
Appraised fair market value of Warehouse\			1,19,250
Cost basis of Warehouse			63,796	(119250/243000)*130000
Answer b			Amnt($)
Selling price Warehouse and Land			1,30,000
Appraised fair market value of Warehouse-a			94,250
Appraised fair market value of Land-b			1,30,000
Appraised fair market value Warehouse + Land(a+b)			2,24,250
Selling price Warehouse and Land			1,30,000
Appraised fair market value of Land			1,30,000
Cost basis of land			75,362	(130000/224250)*130000
Selling price Warehouse and Land			1,30,000
Appraised fair market value of Warehouse\			94,250
Cost basis of Warehouse			54,638	(94250/224250)*130000

Answer c - Bob likely prefer a mainly due to high appraised value mean high depreciation . In case of Warehouse and land property , Warehouse having high appreciated value with high depreciation rate .

Bob will look for more depreciation deduction . As per first option (a), appraised value of Warehouse $ 119250 as compared with option (b) appraised fair market value Warehouse $ 94250 , which is lower than Option 1 and High appreciated value will bring more depreciation . So Bob will select Answer a