Chapter 9 Solutions to assigned problems
Determine the adjusted basis of each of the following assets:
a. Leineia purchased an automobile two years ago for $30,000.
uses it 75% in her business and 25% for personal use.
To date, she
has deducted $4,209 in allowable depreciation on the business use
portion of the automobile.
Because the automobile is a mixed-use asset, the business
basis and the personal use basis must be kept separately.
initial basis allocation is based on the percentage of business
and personal use.
The business portion of the automobile is
depreciable and depreciation deductions will reduce its basis:
b. Three years ago, Quon purchased an office building for $330,000.
The purchase price was properly allocated as $250,000 to the
building and $80,000 to the land.
The building remodeling cost
He paid $12,000 for the installation of a parking lot and
Insurance premiums on the building are $5,000 per year.
He has deducted total allowable depreciation on the building of
$70,620 and $1,000 on the land improvements for the three years.
The adjusted basis of the land and the building must be
determined separately because the building is subject to
depreciation while the land is not.
The land improvements must
be accounted for separately since the depreciable life for the
improvements is shorter than the depreciable life of the building.
The property taxes and the insurance premiums of $5,000 are
expensed in the current year.
The adjusted basis of each is:
Parking lot and