In January 2011, Tammy acquired an office building in downtown Syracuse, New York for $400,000. The building was originally constructed in 1932. Of the $400,000 cost, $40,000 was allocated to the land. Tammy immediately placed the building into service, but quickly realized that substantial renovation would be required to keep and attract new tenants. The renovations, costing $600,000, were of the type that qualifies for the rehabilitation credit. The improvements were completed in October 2011.
a. Compute Tammy's rehabilitation tax credit for the year of acquisition.
b. Determine the cost recovery deduction for 2011.
c. What is the basis in the property at the end of its first year of use by Tammy?