Sebastian purchases two pieces of equipment for $189,000. Appraisals of the equipment indicate that the fair market value of the first piece of equipment is $132,300 and that of the second piece of equipment is $207,900. What is Sebastian's basis in these two assets? If required, round your interim calculations to two decimal places. Use rounded amounts in subsequent computations. If required, round final answers to the nearest dollar. Sebastian's basis for the first piece of equipment is $ and $ for the second piece of equipment.

Sebastian basis in first piece of assets is $73,500 and second piece of assets is $115,500

Explanation:

Calculation of the total fair market value

Total fair market value = Fair market value of first piece of equipment + Fair market value of second piece of equipment

Total fair market value = $132,300 + $207,900

Total fair market value = $340,200

Therefore, the total fair market value is $340,200.

Calculation of Sebastian “S” basis in assets:

“S” basis in assets in first piece of assets  = Fair market value of first piece of equipment  / Total fair market value * Purchase cost

= $132,300 / $340,200 *  $189,000

= $73,500

“S” basis in assets in second piece of assets  = Fair market value of second piece of equipment  / Total fair market value * Purchase cost

= $207,900 / $340,200 *  $189,000

= $115,500

“S” basis in first piece of assets is $73,500 and second piece of assets is $115,500.

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