Bogart Development purchased a tract of land on August 31 of the current year, paying $225,000....

Bogart Development purchased a tract of land on August 31 of the current year, paying $225,000. Prior to the sale, the seller paid property taxes of $18,000 on the property. The taxes covered the calendar year period January 1 through December 31. What will be Bogart’s tax basis in the land?

Expert Solution

Answer:

Bogart's will be permitted to deduct only the portion of the taxes incurred on or after the date of sale of land.

Since the land was purchased on August 31, Bogart's is considered to have owned the land for 152 days out of 365 days

Hence, ($18000*152/365) = $ 7496/- will be deductible by Bogart's. The remaining $ 10504/- in the property taxes will be deductible to the seller of the land.

ekkarill92 answered 2 years ago

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