Question

2.Gary inherited a Maine summer cabin on 10 acres from his grandmother. His grandparents originally purchased the property for $500 in 1950 and built the cabin at a cost of $10,000 in 1965. His grandfather died in 1980 and when his grandmother recently passed away, the property was appraised at $500,000 for the land and $650,000 for the cabin. Since Gary doesn’t currently live in New England, he decided that it would be best to put the property to use as a rental. What is Gary’s combined basis in both the land and cabin?

Answer 1

Gary's combined basis in both the land and cabin will be:

Land- $500000

Cabin- $650000

Thus the combined basis in both land and cabin will be $1150000.

Explanation- Since Gary has inherited the property from his grandparents so his basis will be the fair market value at the time of death i.e. the date when the property was transferred in his name. So the combined basis will be $1150000.

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