Ted Purchases Some Forest Land in 2015 with the Intention

question 13

Multiple Choice

Ted purchases some forest land in 2015 with the intention of building a log cabin to use as a vacation home.To obtain the land,Ted pays $10,000 cash,assumes the seller's $19,000 mortgage on the land and pays $3,000 in commissions and legal fees related to the purchase.In 2016,Ted pays a contractor $4,000 to bulldoze and level the site of the log cabin.In 2017,Ted has a well dug and water and sewer lines laid in the ground at a cost of $6,000.Ted paid $2,000 of property taxes in 2015 and $5,000 of property taxes in 2016 and 2017 on the land.What is Ted's basis in the land at the end of 2017?

• A)$54,000
• B)$42,000
• C)$38,000
• D)$36,000
• E)$32,000

---

Definitions:

Acquisition Cost

The total cost incurred to acquire an asset, including the purchase price and any associated costs such as installation and transportation.

Goodwill

Goodwill is an intangible asset that arises when a company acquires another for a price higher than the fair value of its net identifiable assets, representing factors like brand reputation or customer relationships.

Identifiable Net Assets

The portion of a company's net assets that can be attributed to specific assets and liabilities, excluding goodwill.

Amortization Period

The length of time over which a company gradually writes off the initial cost of an intangible asset.