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In: Accounting

Wanting to finalize a sale before year-end, on December 29, WR Outfitters sold to Bob a...

Wanting to finalize a sale before year-end, on December 29, WR Outfitters sold to Bob a warehouse and the land for $178,000. The appraised fair market value of the warehouse was $105,750, and the appraised value of the land was $199,750

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 is $90,750, and the appraised value of the land is $214,750?

c.) Which appraisal would Bob likely prefer?

  • Appraised value in part (a)

  • Appraised value in part (b)

Solutions

Expert Solution

a Bob Basis Warehouse and the Land
Warehouse $178000*$105750/($105750+$199750)
                                                     $61,615
Land $178000*$199750/($105750+$199750)
                                                     $116,385
b Bob Basis in warehouse and land
Warehouse $178000*$90750/($90750+$214750)
                                                        $52,876
Land $178000*$214750/($90750+$214750)
                                                      $125,124
c Bob would like to prefer the appraisal value for the following
For warehouse it would prefer part A as it is higher than in part B
For Land it would prefer Part B as it is higher than in Part A

ekkarill92 answered 1 month ago
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