Sebastian purchases two pieces of equipment for $129,000. Appraisals of the equi

Question

Sebastian purchases two pieces of equipment for $129,000. Appraisals of the equipment indicate that the fair market value of the first piece of equipment is $90,300 and that of the second piece of equipment is $141,900. What is Sebastian's basis in these two assets?

If required, round your interim calculations to two decimal places. Use rounded amounts in subsequent computations. If required, round final answers to the nearest dollar.

Sebastian's basis for the first piece of equipment is $ and $ for the second piece of equipment

Explanation / Answer

Basis of the asset will be calculated by

Basis of an asset = (fair market value of asset/fair market value of all asset) × cost of all assets

For the first piece of equipment the basis will be

= $90300/$90300+$141000 × $129000 = $50361.87

For the second piece of equipment the basis will be

= $141900/$90300+$141900 × $129000

= $78833.333

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