Vitner's Ltd. purchased land and a building for the lump sum of $6.0 million. To report a higher net income, Mary Drink allocated 60% of the purchase price to the building and only 40% to the land. A more realistic allocation would have been 80% to the building and 20% to the land.

Requirements

1. Explain the advantage of allocating too little to the building and too much to the land.

2. Was Vitner's allocation ethical? If so, state why. If not, why not? Identify who was harmed?