In this case, the taxpayer has two properties; 1 which was acquired on March 6, 2016, and two which was identified on April 7, 2016, and bought four days later. The contract purchase price for both properties is 178,900 which can be broken down into 75,900 and 103,000 for properties 1 and 2 respectively. The statement charge to basis for property 1 was 1,141 obtained by adding 250, 751, 100, and 40. For the second property, it was 2,083 which is the sum for 150, 918, 100, 40, 575 and 300. The total for the two properties is 3,224. The total cost for 1 IS 77,041 and 105,083 for property 2. The figures are the sum of the purchase price and the settlement charges to basis. The total for both numbers is 182,124. Property 1 constitutes 42.30% while 2 make up 57.7% of the total cost. The deferred gain applied obtained by multiplying the respective percentages by the gain is 36,136 and 49,288 for 1 and 2, and their sum is 85,424.
The basis for 1 and 2 is 40,905 and 55,795 adding up to 96,700. The basis is obtained by deducting the deferred gains from the total cost of property for both 1 and 2. The step up is 7,839 and 10,693 obtained by multiplying the step up value with the percentage of each property. Original is 33,066 and 45,102 obtained by deducting the step up from the basis. The building is 29,849 and 33,616 for 1 and 2 resulting in a total of 63,465. The building value for 1 was obtained by multiplying the basis value with 72.97% while the figure for 2 was computed by multiplying the basis with 60.25%. The original amount of 24,128 and 25,814 was obtained by deducting the step up the value from the building.
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The value of land is 11,057 and 22,178 for 1 and 2 respectively and is obtained by subtracting building from the basis. The total amount of land is 33,235. The step-up figure is 2,119 and 2,890 from the two properties, and the values are obtained by deducting the step up cost in building from the step up figure in basis. The original land value is 8,938 and 19,288 for property 1 and 2 and is obtained by subtracting the step up value from the land figure. The sum of both property 1 and 2 up to this level is 96,700.
The 1250 recapture is applied is 10,336 and 14,098 for both properties and are computed by multiplying their percentages by the 1250 recapture value. The original value is 7,852 and 10,711 both calculated by multiplying the percentage of each property by their respective original 1250 recapture values. The step-up value for recapture is 2,484 and 3,387 and is computed by subtracting the original recapture from 1250 recapture applied.
The contract sale price is 140,000, and the selling expenses are 11,370 which is calculated by adding 840000, 15, 30, 2100, 700, and 125. The exchange fee is 1,250, and the net is 127,380 computed by subtracting the selling expenses and the exchange fee from the contract sales price. The basis of property sold was; original, 23,424 (64023-13278-28921-484+3279+101+10720-2344-1339-1021-17-9786+2417+74) and step up 18,532 (1339+13278-3279-101+9786-2417-74) both totalling to 41,956. The gains are 85,424 obtained by deducting the sum of the basis of property sold from the net figure. The 1250 recapture is 24,434 (29942-358-350-2700-287-182-627-205-224-379-196). The original 1250 recapture is 18,563 (24,434 – 5,871) and the step up 1250 recapture is 5,871 (3279+101+2417+74).
