Question

sebastian purchases two pieces of equipment for $137,000. appraisals of the equipment indicate that the fair market value of the first piece of equipment is $95,900 and that of the second piece of equipment is $150,700. what is sebastian's basis in these two assets?

Answer 1

Sebastian's basis in the two pieces of equipment he purchased for $137,000 is calculated based on their fair market values. The first piece has a basis of $56,573.38, and the second piece has a basis of $80,426.62.

Step-by-step explanation:

To determine Sebastian's basis in the two assets he purchased, one must allocate the total purchase price to the two pieces of equipment based on their fair market values. The fair market values of the first and second pieces of equipment are $95,900 and $150,700 respectively, totaling $246,600. The basis of each asset is calculated by dividing the purchase price of each item by the total fair market value and then multiplying by the total amount paid for both.

For the first piece of equipment, the calculation would be: ($95,900 / $246,600) * $137,000, which gives us a basis of approximately $56,573.38. For the second piece of equipment, it would be: ($150,700 / $246,600) * $137,000, resulting in a basis of approximately $80,426.62. Therefore, Sebastian's basis in the first piece of equipment is $56,573.38, and in the second piece of equipment is $80,426.62.