Purchased Assets
If a capital asset is purchased or funds are expended for its establishment, the original basis is its acquisition or establishment cost. The total purchase price, including any extra expenses incurred in obtaining title to the property, is allocated between the assets purchased.
To determine your basis an estimation of the fair market value (FMV) of the individual assets must be made. The FMV of each individual asset is then divided by the total of the individual FMV's. This amount is the percent of the total FMV. Next multiply the percent of total FMV by the total acquisition cost. This amount is your basis for each of the individual assets. Don't forget to add in any additional costs to the total acquisition cost that where incurred in order to purchase the property.
| Asset description | Fair Market
Value (b) |
% of total Fair
Market Value (d) = b/c |
Basis (e) = d x a |
| House | 12,000 | 6.62 | 9,122.36 |
| Barn | 8,000 | 4.42 | 6,090.76 |
| Fences | 1,400 | 0.77 | 1,061.06 |
| Timberland 90 acres @$120/acre | 10,800 | 5.96 | 8,210.88 |
| Pastureland, 20 acres @$800/acre | 23,200 | 12.81 | 17,652.18 |
| Homestead, 1 acre @$1,600 | 1,600 | 0.88 | 1,210.64 |
| Timber, merchantable; 12 MBF/acre @$110/MBF | 118,800 | 65.56 | 90,340.68 |
| Timber, young growth, 3 MBF/acre @ $20/MBF | 5,400 | 2.98 | 4,106.44 |
| Totals | (c) 181,200 | 100.0 | 137,800 |
A program is available to help determine the basis in your assets associated with your timberland ownership.