Question

Jackie purchased a home for $750,000. She then added a swimming pool costing $35,000 and a patio deck costing $18,000. What is Jackie's adjusted basis in the property?
$750,000
$768,000
$785,000
$803,000

Answer 1

Answer: $803,000

Solution:
The adjusted basis of a property is the original purchase price plus the cost of capital improvements.

Purchase price of home: $750,000

Swimming pool (capital improvement): +$35,000

Patio deck (capital improvement): +$18,000

Now add them up:

750
,
000
+
35
,
000
+
18
,
000
=
803
,
000
750,000+35,000+18,000=803,000

Answer 2

$803,000

Adjusted basis = original purchase price + capital improvements = $750,000 + $35,000 + $18,000 = $803,000.