Peter is assessed $630 for street improvements in front of his house.Which of the following statements is correct?
A)Peter must deduct the assessment as a tax.
B)Peter must reduce the property basis by $630.
C)Peter must increase the property basis by $630.
D)Peter can elect to deduct the $630 currently or increase the basis in the property.

Question

Quizplus · Accepted Answer

When a homeowner is assessed for street improvements, the assessment is added to the property basis, which is the amount used to determine gain or loss when the property is sold. Therefore, Peter should increase the property basis by $630, not deduct it as a tax or reduce the property basis. Option D is not applicable as deductions and basis adjustments are not interchangeable.

Peter Is Assessed $630 for Street Improvements in Front of His