Question

Alicia sold her personal residence to Rick on June 30 for $295,000. Before the sale, Alicia paid the real estate tax of $4,425 for the calendar year. For income tax purposes, the deduction is apportioned as follows: $885 to Alicia and $3,540 to Rick. What is Rick's basis in the residence?

Answer 1

$291,460

Step-by-step explanation:

Data provided in the question:

Purchasing cost of the personal residence = $295,000

Real estate tax paid by Alice before the sale = $4,425

Property tax allocated to Alicia = $885

Property tax allocated to Rick = $3,540

Now,

Rick's basis in the residence will be

= Purchase cost - Property taxes allocated to Rick

= $295,000 - $3,540

= $291,460