Steve Seller owns raw land he holds for investment located near Fresno, California. Steve has owned the
Question:
Steve Seller owns raw land he holds for investment located near Fresno, California. Steve has owned the land for 9 months.
Relevant information regarding the property is as follows:
Land:
Fair Market Value: $10 MM
Adjusted Basis: $6 MM
Debt: None.
On January 1, 20x1 Steve sold the land to Bonnie for $10 MM sales price pursuant to the following terms:
1) $2 MM cash payment to Steve; and
2) $8 MM nonrecourse note payable by Bonnie to Steve as follows:
(a) interest rate--accrued and payable at the applicable federal rate.
(b) principal payments due on January 1 of each year, as follows:
--January 1, 20x2: $2 MM
--January 1, 20x3: $4 MM
--January 1, 20x4: $2 MM.
What is Bonnie's cost basis in the land ?
South Western Federal Taxation 2015
ISBN: 9781305310810
38th Edition
Authors: William H. Hoffman, William A. Raabe, David M. Maloney, James C. Young