1

I bought two pieces of real estate from an online auction site. They charged me fee for the right to participate in the auction.

First question:

Should I count this fee as basis for these assets? Or as a business expense?

Second question:

If it is basis, for which asset do I count it as basis? Intuitively, it should be split 50%-50%, but maybe I should just pick one of the assets and include it in that one.

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For accounting purposes, consider the costs of acquisition as part of the cost of the asset as opposed to expensing. This will be important to consider if you need to amortise the asset for reporting or tax purposes.

Dr. Land $250,000

Dr. Building: $250,000

Cr. Cash $500,000

The acquisition of the land from previous owners.

And

Dr. Land $12,500

Dr. Building $12,500

Cr. Cash $25,000

Fees paid to auctioneer who helped acquire the land.

The basis for dividing the cost should be done at appraised prices. These appraised prices will appear in the first entry and should help you along.

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    I'm not sure I understand your answer. What do your abbreviations "Dr" and "Cr" mean? Also, what do you mean by "the basis for dividing the cost should be done at appraised prices?" I assume you mean "the cost of the auction fee should be divides between the assets in proportion to their appraised value at time of acquisition", but I'm not sure. – Andrew Cone Jun 26 '17 at 0:10
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    An appraisal will be needed to determine the share of the cost. The abbreviations I use refer to Debits and Credits. A debit is something you take possession of, a credit is a note of what is outbound. – Phillip Siebold Jun 26 '17 at 1:32
  • why the heck would anyone vote this answer down? – Fattie Jun 26 '17 at 10:19

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