L K Williams wrote:
- quote -

Got it thanks alot!

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Zigball wrote:

- quote -

This link explains the CPI for rentals and includes a
discussion of use of the year 2001:

http://www.bls.gov/cpi/cpifact6.htm

Here is a FAQ page which should answer any other questions
you may have on the CPI:

http://www.bls.gov/cpi/cpifaq.htm

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"Zigball" <zigball[at]gmail.com> wrote:

- quote -

What they are doing is figuring out the increase from 2001
to now. They are saying that $58,378 in current dollars is
the same as $50,000 in 2001 dollars. The dollars have
depreciated but you are required to pay the same value
rather than the same amount of dollars.

First they take the $50,000 and essentially back out the
2001 CPI by dividing by it. Then they add back the current
CPI by multiplying that figure.

Their calculation, as you have described it, is correct.

Stu

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Zigball wrote:

- quote -

Your formula is more correctly shown as:
($50,000 / 185) * 216 = $8,378.32

The 2001 CPI was probably a "given" of your homework problem.

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Zigball" <zigball[at]gmail.com> wrote:

- quote -

Another way to look at this is to say that the CPI increased
31 points between 2001 and the current CPI, or approximately
15%. So, to make the ground rent neutral, in current
purchaseing value, the rent must increase by the same
percentage. Do the math, it comes out the same.

Lanny K. Williams, CPA
Nawarat, Williams & Co., Ltd.
Income Tax Services for Expatriate Americans

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zigball[at]gmail.com (Zigball) posted:

- quote -

It appears your ground rental cost is indexed to the CPI of
2001 (presumably the year the lease started). That would
mean the calculation in question would be stated as follows:

$50,000 = base cost as of 2001, when CPI=185

Current CPI is 216, which is 31 higher than 185

31 divided by base of 185 = 16.75675 %

16.75675 X $50,000 = $8,378.38

[Note: slight difference in pennies probably from rounding.]

Ergo, the CPI increase was about 16.76%, and that was the
amount of increase for your ground rental.

So, for example, if the next year's CPI report for the
relevant period shows 230, you could calculate your ground
rental as follows:

230 - 185 = 45
45/185 = 24.32%
2432 X $50,000 = $12,162
$50,000 + $12,162 = $62,162

Bill

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I have a problem maybe you'll be able to help me.I have no
idea of how the calculations work for CPI. I have a formula
that takes the ground rental cost lets say $50000 then takes
the cpi from 2001 which is 185 and divides $50000 by 185
which gives you 270.27 then multiples that by the current
CPI which is 216 and total is $58378.32 this becomes total
ground rentals notice the difference between $50000 and
$58378.32 is $8378.32. My major problem is where does 2001
CPI come into the picture and why, do you know. I don not
understand these calculations much is there anyone who can
help me understand it so that I will be able to do these
calculations myself!

$50000 / 185 * 216 = $8378.32 + $50000 = $58378.32

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