Question

Alvin is employed by an automobile dealership as its manager. As such, he purchased an SUV for $32,000 (fair market value is $48,000). No other employees are permitted a discount. What is Alvin’s basis in the SUV? a. $16,000. b. $32,000. c. $48,000. d. $80,000. e. None of the above.

Answer 1

The answer is: C) $48,000

Step-by-step explanation:

Alvin's cost basis should be the fair market value of the SUV.

The IRS is very specific in this point and its definition of basis is: "Basis is the amount of your investment in property for tax purposes. Use the basis of property to figure depreciation, amortization, depletion, and casualty losses."

Not on the federal government, but also state and local governments use guidelines (states' motor vehicle websites) to determine the value of a used car and they tax people based on those guidelines.