On January 6, 2018, Dan and his wife Lucy purchased a one acre estate in nantucket as a future rental property. The property was cost $1,250,000. It started renting on June 1^st of the same year and has been in service ever since. According to the real estate assessment at sale, the house was assessed at $687,500 and the surrounding land was assessed at $250,000. Separate, on May 1st, Dan and Lucy purchased new appliances in that cost of $35,000 for the rental.

1. Calculate the basis of the land at the time of purchase.
2. Calculate the basis of the house at the time of purchase.
3. Calculate the basis of the land at the end of 2018.
4. Calculate the basis of the house at the end of 2018.
5. Calculate the basis of the appliances at the end of 2018.
6. If Dan and Lucy begin building a new wing in October 2021, will this increase or decrease depreciation?

Answer rating: 100% (QA)

Lets break down each calculation step by step 1 Basis of the Land at the Time of Purchase The basis ... View the full answer