Ralph Birch purchased land and a building which will be used in connection with Birch’s business. The costs associated with this purchase are as follows:
|
Cash down payment |
$ 40,000 |
|
Mortgage on property |
350,000 |
|
Survey costs |
2,000 |
|
Title and transfer taxes |
2,500 |
|
Charges for hookup of gas, water, and sewer lines |
3,000 |
|
Back property taxes owed by the seller that were paid by Birch |
5,000 |
What is Birch’s tax basis for the land and building?
- $ 44,500
- $394,500
- $397,500
- $402,500