Facts and Issue: Mary Albers purchased an office building in Orlando, FL on September 15, 2021, for $600,000. According to the appraisal she received in connection with the purchase (paid for by seller), the FMV of the land was $100,000 and the FMV of the building was $500,000. In connection with the purchase, Mary put down $150,000 cash and obtained a $450,000, 20 year, 4.5% loan, paying one point, $4,500, as a loan origination fee. Mary also paid $3,000 for title insurance, $2,500 documentary stamp tax on the mortgage, $50 for a credit report (required by lender), $450 for inspection fees required by lender (termites, roof), $1,500 for one year's premiums on a property insurance policy (covers fire and storm damage, etc.), and $425 for a land survey (required by lender). In addition, she paid at closing $777 representing interest for two weeks in September ($450,000 X 0.045 X 14/365), $4,000 into escrow for future property taxes and $450 for future insurance.

The seller paid $8,500 representing his share of the prorated property taxes, $3,000 representing his share of the title insurance, $400 for the appraisal (paid prior to closing) and $3,500 for document stamp tax on the title.

Beginning November 1, Mary will pay $1,687 interest each month (ignore amortization of the loan principal). She will also pay an additional $1,000 each month into an escrow account for property taxes and $125 each month for insurance. The lender paid the 2020 property taxes of $11,350 in November 2021 (and will pay future years taxes as well) and the annual insurance premium of $1,500 will be paid in September 2022 (and future years).

Mary immediately began using the building in her business. She wants to know how each of the above amounts will be treated. Assume Mary is a cash-basis taxpayer.

Required: 1. Determine her basis for the land and building. For each amount included provide a brief summary of the authority regarding such treatment.

2. Explain the treatment of any amount not included in the basis of the property. That is, identify amounts that are currently deductible, amounts that are not deductible but are included in the basis of the property, and amounts that are accorded other treatment (e.g., they are amortized). Again provide a very brief summary of the authority supporting such treatment.

3.Specifically identify and summarize the total amount deductible (related to this building) by Mary in 2021 (including depreciation, amortization, interest, etc...)