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    Tax Accounting: calculate adjusted basis in property

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    1). Michelle purchased her home for $150,000, and subsequently added a garage costing $25,000 and a new porch costing $5,000. Repairs to the home's plumbing cost $1,000. The adjusted basis in the home is
    a. $150,000.
    b. $151,000.
    c. $180,000.
    d. $181,000.

    2). Which one of the following does not affect the adjusted basis of a house held as rental property?
    a. depreciation deduction
    b. adding a new room to the house
    c. painting of more than 50% of the rooms in the home
    d. installation of a completely new plumbing system

    3). Jordan paid $30,000 for equipment two years ago and has claimed depreciation deductions of $15,600 for the two years. The cost of repairs during the same time period was $2,000 while a major overhaul which extended the life of the equipment cost $7,000. What is Jordan's basis in the equipment at the end of the two-year period?
    a. $14,400
    b. $16,400
    c. $21,400
    d. $30,000

    4). Allison buys an asset and pays cash of $50,000, signs a note of $10,000 and assumes a liability on the property for $3,000. Also, Allison pays an installation cost of $500 and a delivery cost of $800. Allison's basis in the asset is
    a. $60,000.
    b. $63,000.
    c. $63,500.
    d. $64,300

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    Solution Preview

    1. The adjusted basis in Michelle's home is 150,000 + 25,000 + 5,000 = 180,000. The plumbing repairs do not add value or ...

    Solution Summary

    The solution explains the concepts for the basis calculation and gives the computations.