Question 10 10 pts John has invested in several pieces of real estate. Which one of the properties that John owns would be considered commercial property? 4 bedroom home that he does not rent out 100 acres of land in the mountains that he hopes to subdivide and sell as residential lots Fourplex that he rents to college students 20 acre tract of farm land that is sitting idle
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There is a parcel of land next to the Playful Paws, Inc. building. Ellen, the owner of this property, approached John to discuss the idea of selling it to him. John is interested. Ellen knows that John owns a vacant lot downtown (referenced in the case study facts) and proposed an exchange. She told John there may be a tax advantage for John in doing so. The land next to Playful Paws is worth $100,000. In addition to the land, Ellen will pay John $20,000 cash at closing. John owns a vacant lot near downtown that they rent as parking space during special events (arts festival, summer concerts, etc.). He inherited this parcel from his uncle (Mira’s brother) in 2010. His uncle purchased it for $52,000 in 1995. The value at the time of his uncle’s death was $82,000. This is a dirt lot; John has made no improvements to it. Real estate taxes are $600 this year.
Akash M.
A real estate developer is considering the purchase a large 20 acre piece of farmland for $4 million. It will cost an additional $7 million to install roads, sidewalks, and utilities (water, hydro, gas, storm & sanitary sewers). The developer is planning on allocating these costs based on acreage. At the end of the process, the farmland will be converted and zoned into three types of land: industrial, commercial and residential. At this point, the developer plans on further developing the land into industrial buildings, commercial buildings and residential buildings. In order to encourage the real estate developer to develop this land, the City Council is allowing the developer to chose the zoning for this farmland project. The developer can either choose either residential, commercial or industrial zoning, or any combination of the three options. Information about developing the 20 acres of land is as follows Industrial Commercial Residential Final Selling Price per building (in $) 5.0 million 3.0 million $800,000 Variable cost per building (in $) 3.2 million 1.7 million $600,000 Land required per building (in acres) 1 per 3 acres 1 per 2 acres 10 per acre Maximum potential demand (in buildings) 2 4 100
Ivan K.
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