Determine the adjusted basis of each of the following assets:

a. Leineia purchased an automobile 2 years ago for $30,000. She uses it 75% in her business and 25% for personal use. To date, she has deducted $4,209 in allowable depreciation on the business use portion of the automobile.

b. Three years ago, Quon purchased an office building for $330,000. The purchase price was properly allocated as $250,000 to the building and $80,000 to the land. Building remodeling cost $8,000. He paid $12,000 for the installation of a parking lot and sidewalks. Insurance premiums on the building are $5,000 per year. Quon has deducted total allowable depreciation on the building of $70,620 and $1,000 on the land improvements for the 3 years.

Answer and Explanation:

The computation is shown below:

                  75%                      25%             100%

Particulars       Business UsePersonal Use    Total

Initial Basis    $22,500         $7,500            $30,000

Less: Depreciation-$4,209              0                   -$4,209

Adjusted Basis      $18,291           $7,500             $25,791

b    

Particulars                     Building        Land            Land Improvements

Original Cost               $250,000       $80,000  

Remodeling cost        $8,000  

Parking lot and sidewalks                             $12,000

Depreciation                -$70,620                           -$1,000

Adjusted basis         $187,380$80,000           $110,000

We simply classify the cost to each type of asset which is shown above

answer; ///deficit;

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