Discussion Question-

Western Bank & Trust purchased land and a building for the lump sum of $3,000,000.  To get the maximum tax deduction, Western allocated 90% of the purchase price to the building and only 10% to the land.  A more realistic allocation would have been 70% to the building and 30% to the land.

• Explain the tax advantage of allocating too much to the building and too little to the land.
• Was Western's allocation ethical?  If so, state why.  If not, why not?  Identify who was harmed.