Property Dispositions, Initial Basis (LO. 4, 5) On October 1, 2017, Mitzo Realty
ID: 2606253 • Letter: P
Question
Property Dispositions, Initial Basis (LO. 4, 5) On October 1, 2017, Mitzo Realty Partnership purchases a lot for future development for $60,000 from the Elm Trust. The trust's adjusted basis in the lot is $20,000. Real estate taxes attributable to the property are $1,000. The city in which the lot is located operates on a calendar year, and taxes are due on April 1 of the following year. The sales agreement provides that Mitzo will pay the property tax bill in 2018. Note: Assume for computational purposes a 365-day year. Do not round any divisions. Round other computations to the nearest whole dollar. a. Mitzo's initial basis in the lot is $ b. Elm Trust's gain on the sale is $ c. Assume that the sales agreement provides that Elm Trust will pay its portion of the real estate taxes. The sales price remains at $60,000, On April 1, 2013, Mitzo Realty Partnership pays the $1,000 property tax bill. Then Mitzo's initial basis in the lot is and Elm Trust's gain on the sale is sExplanation / Answer
A. Mitzo's initial basis in the lot = 60000+(1000*273/365)= 60000+748 = 60748
B. Gain realised on sale = 60000+(1000*273/365)-20000= 40748
C. Mitzo's initial basis in the lot= 60000
Elm Trust's gain on the sale = 60000-20000= 40000
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