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.

Here's what you know:

  • $297 for initial testing costs
  • $543 for the initial purchase
  • $158 for purchase price
What is the total basis for the property?

Answer:

  • The total basis for the property is $998.00.

Explanation:

  1. The initial purchase price is added to the property's basis.
    TOTAL PROPERTY BASIS = $543
  2. Initial testing costs are added to the property's basis, because the basis includes all costs prepare property for its intended use.
    TOTAL PROPERTY BASIS = $543 + $297
  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 = $543 + $297 + $158
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