Oregon Tax Consultants Practice Exam

What can be a result of subdividing property?

1. A single basis for all lots

2. A separate basis for each subdivided lot

3. A need to reassess property taxes

4. Decreased value of the original lot

The correct answer is: A separate basis for each subdivided lot

Subdividing property typically results in the establishment of a separate basis for each subdivided lot. This is significant because each lot can then be treated as an individual property for purposes such as valuation, taxation, and potential sale. When a property is subdivided, the original basis (the cost basis of the land) is allocated among the newly created lots. This allocation is crucial for determining capital gains tax implications when the property is sold. In addition, having separate bases ensures that property taxes can be assessed accurately for each lot, reflecting their individual values, which may differ based on location, size, and other factors. This process can enhance the management and financial potential of the property owner, as each lot can be sold, developed, or utilized independently.