D is corrent. The requirement is to determine Jones’ tax basis for the purchased land and building. The basis of property acquired by purchase is a cost basis and includes not only the cash paid and liabilities incurred, but also includes certain settlement fees and closing costs such as abstract of title fees, installation of utility services, legal fees (including title search, contract, and deed fees), recording fees, surveys, transfer taxes, owner’s title insurance, and any amounts the seller owes that the buyer agrees to pay, such as back taxes and interest, recording or mortgage fees, charges for improvements or repairs, and sales commissions.
A is incorrect. The property’s basis includes the mortgage on the property.
B is incorrect. The land’s basis includes the back property taxes.
C is incorrect. Acquisition costs include the survey and utility hookups.
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