Question

Suzy purchased 2 acres of vacant land in 2018 by paying $4,000 in cash at closing and borrowing $40,000 to be repaid at $8,000 per year for the next 5 years with interest on the unpaid balance at 10%. As part of the purchase agreement, Suzy agreed to let the seller store farm equipment on the land for 2 years (rental value of $1,000 per year). Suzy also pays legal, survey and title abstract fees of $700 on the purchase. In 2019, she paid $1,250 in property tax on the land. In addition, the county paved the road that runs by the land and assessed each taxpayer $1,300 for the paving, which Suzy paid in November 2019. What is Suzy's adjusted basis of the land at the end of 2019?

Answer 1

Calculation of Suzy's adjusted basis of the land at the end of 2019:

Adjusted Basis
Details	Amount
Cash paid	4,000
Amount borrowed	40,000
Value of rental to seller	2,000
Points paid by seller on Suzy's loan	-
Attorney and abstracting fees	700
Initial basis in land in 2018	46,700
Paving assessment	1,300
Adjusted basis in land in 2019	48,000

Therefore, Suzy's adjusted basis of the land at the end of 2019 = 48,000