Question

What is the Adjusted Basis on a property using the following criteria:________ Original Purchase Price: $500,000 Capital Improvements: $89,000 Depreciation: $184,000

Answer 1

Answer: using adjusted basis, property value= $405000

Explanation:

Using adjusted basis to value the property for tax purpose, sum the original purchased price with the capital improvement cost and then subtract depreciation( capital reduction) .

Value of property = (500000+89000)÷184000=405000

Answer 2

Answer:

Adjusted basis                $ 405,000

Explanation:

The adjusted basis will add to the original purchase price the capital improvements and decrease conidering the depreciation.

expenditures related to maintenance or repairs would not increase the adjusted basis as those just maintain the current value. It has to be an improvement, like redising, add a room, a bathroom plant some valuable ornament trees or any of these kind of expenses. Change a broken window for a new one is not considered capital improvement.

Original Purchase Price: $500,000

Capital Improvements:   $   89,000

Depreciation:                  $( 184,000)  

Adjusted basis                $ 405,000