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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 Summary

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

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 ...

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