William Has Decided to Purchase a Large Apartment Complex

question 2

Essay

William has decided to purchase a large apartment complex. He pays $100,000 cash, obtains a loan on the property for $500,000, and assumes the first mortgage balance of $250,000. He also gives the sellers $100,000 of marketable securities that he purchased three years ago for $125,000. He paid a finder's fee of $5,000, legal fees of $6,000, and transfer taxes of $12,000. What is William's acquisition basis for the building? Does he have any other tax consequences as a result of this purchase?

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Definitions:

Operating Activities

Business actions directly related to the production and delivery of goods and services, generating the company’s primary revenue.

Statement of Cash Flows

A financial statement that provides aggregate data regarding all cash inflows and outflows a company receives from its operational, investing, and financing activities.

Government Agencies

Entities established by a government to perform specific functions or provide services in accordance with legislative mandates.

Checks Outstanding

Refers to checks that have been written by a company but have not yet been cashed or cleared by the bank.