On October 1, 2016, Mitzo Realty Partnership purchases a lot for future development for $60,000 from the

Question:

On October 1, 2016, Mitzo Realty purchases a lot for future development for $60,000 from the Elm Trust. The trust's adjusted basis in the lot is $20,000. Real estate taxes attributable to the property are $1,000. The city in which the lot is located operates on a calendar year, and taxes are due on April 1 of the following year. The sales agreement provides that Mitzo will pay the property tax bill in 2017.
a. What is Mitzo's initial basis in the lot?
b. What is Elm Trust's gain on the sale?
c. Assume that the sales agreement provides that Elm Trust will pay its portion of the real estate taxes. The sales price remains at $60,000. On April 1, 2017, Mitzo Realty pays the $1,000 property tax bill. What is Mitzo's initial basis in the lot? What is Elm Trust's gain on the sale?
Partnership
A legal form of business operation between two or more individuals who share management and profits. A Written agreement between two or more individuals who join as partners to form and carry on a for-profit business. Among other things, it states...