For purposes of determining the adjusted basis of a capital asset at the time of its sale,
A)Capital improvements are added to the basis.
B)Ordinary repairs reduce the adjusted basis.
C)Accumulated depreciation is added to the basis.
D)The basis does not include costs such as title insurance and escrow fees related to the initial purchase.

Question

Quizplus · Accepted Answer

Capital improvements are added to the basis, as they increase the value of the asset. Ordinary repairs, on the other hand, are not added to the basis but rather are deductible as expenses in the year they are incurred. Accumulated depreciation is subtracted from the basis, not added to it. Finally, costs such as title insurance and escrow fees related to the initial purchase are included in the basis, as they are considered part of the cost of acquiring the asset.

For Purposes of Determining the Adjusted Basis of a Capital