Determine the Adjusted Basis of the Following Assets

Essay

Determine the adjusted basis of the following assets.
a.Dennis buys land by paying $45,000 in cash and assuming a loan for $45,000. He incurs legal fees and commissions of $5,000. He pays $3,000 to have tree seedlings planted on the property. A flood causes $6,000 of damage to the property. Dennis does not carry flood insurance, so he deducts the total loss on his tax return. His property tax liability for this year is $750 and his interest on the loan is $1,850.
b.Tyler buys 100 shares of Oliver Corporation stock at $150 per share plus commissions of $300. At the end of the year, Oliver pays a $10 per share cash dividend and informs shareholders that $6 per share is taxable as a dividend and $4 is a nontaxable dividend.
c.Taylor Corporation acquires an asset for $8,000 in its first year of operation. Since the company suffers a loss during this first year of operation, the bookkeeper decides to deduct only half of the depreciation that was allowable on this asset and claims a depreciation deduction of $800, instead of $1,600.