Makemore Company Purchases a Factory for $800,000

Multiple Choice

Makemore Company purchases a factory for $800,000. The purchase price is properly allocated 90% to the building and 10% to the land. In the first year, Makemore adds a storage shed to the building at a cost of $8,000. The utility company pays Makemore $1,500 for an easement to run utility lines across the land. A total depreciation of $45,000 is deducted over the 3 years. Determine the adjusted basis of the building and the land as of the end of year 3:

A) $728,000 building; $78,500 land
B) $683,000 building; $80,000 land
C) $683,000 building; $78,500 land
D) $728,000 building; $80,000 land