Purchased Property Tax Basis

Lesson:

For many businesses, buying a machine, property, or tool is just the beginning of the costs.

It turns out that any thing that is required for an item to be prepared and ready for initial use.must be included in the item's basis.

You're a tax accountant, updating a client's property basis.

The only relevant information you've discovered is as follows:

  • $233 for purchase price
  • $467 for the initial purchase
  • $145 for sales tax
What is the total basis for the property?

Answer:

  • The total basis for the property is $845.00.

Explanation:

  1. The initial purchase price is added to the property's basis.
    TOTAL PROPERTY BASIS = $467
  2. Sales tax are added to the property's basis, because the basis includes all costs prepare property for its intended use.
    TOTAL PROPERTY BASIS = $467 + $145
  3. Purchase price are added to the property's basis, because the basis includes all costs prepare property for its intended use.
    TOTAL PROPERTY BASIS = $467 + $145 + $233
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