Question

John is considering purchasing a commercial building. His accountant is working with him to determine the property’s value to John. The initial cost of an investment property plus the cost of any additional improvements less qualified deductions represents the:

Answer 1

Answer:

Adjusted basis

Explanation:

Adjusted basis in accounting is used to calculate the net value of an asset. This is done by reducing depreciation deductions from the original value and adding capital expenses like cost of improvement.

This method is best used when there is need to get accurate gain and loss records, and for tax purposes.

In the given scenario John's accountant is using the adjusted basis when he calculates initial cost of an investment property plus the cost of any additional improvements less qualified deductions