LO3 Determine the adjusted basis of each of the following assets:

a. Andre´ purchased a parcel of land three years ago for $17,000. In the current year, the adjoining property owner sues him, claiming that part of Andre´’s property belongs to him under the right of adverse possession. Andre´ incurs $4,000 in legal fees successfully defending against the lawsuit. He pays annual property taxes of $300 on the land and has paid $3,700 in interest on the loan he took out to acquire the property.

b. Rene´ purchases 1,000 shares of Cramdem Company common stock for $8 per share on October 13, 2009. In 2010, Cramdem pays a taxable cash dividend of 30 cents per share. Rene´ sells 300 shares on August 22, 2011, for $3 per share. On December 2, 2011, Cramdem pays a nontaxable cash dividend of 10 cents per share.

c. Rufus owns 12 acres of land he purchased as an investment for $5,000. He spent an additional $37,000 subdividing the land into residential parcels and having utility lines run to the property. After the subdividing and utility lines had been completed, he gifted two acres of the land to his sister as a wedding present.

Communication Skills