Seven years ago, Paul purchased residential rental real estate that he has been depreciating as MACRS property over 27.5 years. This year, when his adjusted basis in the property was $250,000, Paul transferred the property to the newly formed PLA partnership in exchange for a one-third interest in the partnership. PLA incurred $10,000 of transfer taxes and fees related to the property. How will PLA treat the property?

a. PLA will take the rental real estate at a basis of $250,000 and the $10,000 taxes and fees at $10,000 and depreciate each over 27.5 years
b. PLA will take the rental real estate at a basis of $260,000 and depreciate it over 27.5 years.
c. PLA will take the rental real estate at a basis of $250,000 and the $10,000 of taxes and fees will be treated as a new depreciable property
d. PLA will take the rental real estate at a basis of $260,000 and depreciate it over the remaining 20 years.

Question

contestada

Respuesta :

andromache andromache · Answer 1 · 2021-05-02T04:04:11+02:00

Answer:

c. PLA will take the rental real estate at a basis of $250,000 and the $10,000 of taxes and fees will be treated as a new depreciable property

Explanation:

According to the rule, the adjusted basis of Paul is of $250,000 and it should be depreciated for the predicted remaining life i.e. 20 years

While on the other hand, the $10,000of transfer taxes and fees would be treated as a new purchase of an asset and would be depreciated for 27.5 years

Therefore as per the given situation, the option c is correct