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purchased heavy equipment by giving the seller a $30,000 cash down payment and a 5-year interest-bearing note for the $170,000 balance of the price. Compute Pettit's book basis and tax basis in the equipment

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Answer: $200,000

Explanation:

The book and tax basis will be the same in this instance because the equipment was purchased newly.

The book and tax basis will be the price of the equipment:

Price = Cash down payment + Present value of interest bearing note

= 30,000 + 170,000

= $200,000

Book and Tax basis is therefore $200,000