When does the dollar value for land of low value increase?

• A. Every January 1 by the CPI for the prior year
• B. Every January 1 by the CPI for the following year
• C. Every July 1 by CPI
• D. Every December 31 by CPI

Answer: (A)

Inflation indexing of asset values is done by updating the value at the start of each calendar year using the price change from the previous year. The dollar value for land of low value increases on January 1 by the CPI for the prior year because that prior-year CPI already reflects the inflation actually experienced during the last year, providing a consistent baseline for the new year. Using the CPI for the following year would rely on future data, which isn’t known yet, and adjusting mid-year or at year-end would disrupt a clear yearly baseline. So, the value increases on January 1 by the prior year's CPI. For example, if prices rose 2.5% in the previous year, the land’s value would be increased by 2.5% on January 1.