AICPA Exam CPA-Regulation Topic 1 Question 40 Discussion

Actual exam question for AICPA's CPA-Regulation exam

Question #: 40
Topic #: 1

Fred Berk bought a plot of land with a cash payment of $40,000 and a mortgage of $50,000. In addition, Berk paid $200 for a title insurance policy. Berk's basis in this land is:

A$40,000

B$40,200

C$90,000

D$90,200

Show Suggested Answer

Suggested Answer: D

Choice 'd' is correct. $90,200 is Berk's basis in the land.

Rule: The basis of the property acquired will be the property's cost consisting of the amount of cash paid plus any amount of related debt assumed. Cost will be adjusted to reflect any additional costs incurred in purchasing the property.

Choices 'a', 'b', and 'c' are incorrect, per the above rule.

by Diane at May 05, 2022, 04:45 AM

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