Reference no: EM132642635

Question - On 30 August 1989 Keith bought a holiday house. The property cost $1,990,000. He consulted his accountant regarding the purchase and this advice cost him $1,800 in August 1989. In addition, he paid stamp duty of $46,000 in September 1989. Keith used a loan to acquire the property and paid $1,900 stamp duty on the loan in August 1989. The property was sold in September 2017 for $5,000,000. Costs associated with the sale included commission of $95,000 paid to the real estate agent who sold the property and advertising of $3,000. Both expenses were paid in September 2017. In December 1994 Keith's next-door neighbour, Skinner, disputed the placement of the fence and considered that some of the land on Keith's side of the fence was in fact his land. It cost Keith $63,000 in various fees and costs to prove that the fence was correctly placed. Skinner did not pay any of Keith's costs. Keith incurred legal expenses of $50,000 to evict tenants from the property. Keith also incurred the following expenses in relation to the above property:

Interest on the loan over the ownership period totalled $80,000,

Insurance costs over the period of ownership costing $48,000,

Floorboards were repaired in 1999 at a cost of $88,000,

Rates and land tax of $57,000 were paid during ownership of the property,

Interest of $19,900 was paid since October 1996 when Keith obtained a personal loan to build on a new room at a cost of $74,000.

Required - Calculate Keith's cost base for Capital Gains Tax purposes.