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.
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.
