Canam Group Developers purchased land and a building for a lump sum of $8.0 million. To get the maximum tax deduction, Canam's owner allocated 85 percent of the purchase price to the building and only 15 percent to the land. A more realistic allocation would have been 75 percent to the building and 25 percent to the land.
Required
1. Explain the tax advantage of allocating too much to the building and too little to the land.
2. Was Canam Group Developers' allocation ethical? If so, state why. If not, why not? Identify who was harmed.