94. Carlos leased 200 acres of farmland for use in his farming operations. The lease term was
10 years starting on January 1, 2004. The annual rental was $100,000. Early in the lease,
Carlos constructed a $50,000 drying facility on the leased land. As of January 1, 2011,
Carlos assigned all his lease rights to Lindsey for the balance of the lease. Lindsey paid
Carlos $150,000 on January 1 for the lease term and for the value of the drying facility –
$125,000 allocated to the lease term and $25,000 to the drying facility. Additionally,
Lindsey paid the $100,000 annual rent payment to the lessor. If the drying facility were
depreciated, the deprecation deduction would be $2,000. What is the total amount
Lindsey may deduct on her 2011 tax return for the leased 200 acres including
depreciation, if any?
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