When buildings are purchased, the basis should include the purchase or contract price and costs of acquisition such as attorney fees, appraisers, financial advisors, etc., and any other expenditures necessary to put a building into its intended state of operation less an allocation for the value of the land. When the buildings are constructed, the basis should include all of the costs relative to construction. If you own land with existing buildings which are being used, and the existing buildings are demolished for new construction, the demolition costs are considered part of the cost of the building. During the construction period, interest is considered part of the cost of the building and should be capitalized as part of the building cost. This account includes tangible property of a more or less permanent nature, other than land, buildings, improvements other than buildings, or data processing software, which is useful in carrying on operations.
Examples are machinery, tools, trucks, cars, furniture, and furnishings.
When equipment is purchased, the basis should normally be the amount of money ultimately to be paid for the item including ancillary charges such as transportation charges, installation costs, taxes and any other expenditures required to place the asset in its intended location and condition for use. Donated equipment should be valued at fair market value at date of receipt. Unless the amounts are material, it is not necessary or recommended that any adjustment be made for trade-in allowances. In proprietary funds , the depreciated value of the property traded should be added to the amount paid to determine the basis of the new equipment. In the general fixed asset account group , equipment is normally recorded at the amount paid by the governmental fund .