Question

Which of the following items increases the depreciable basis of a property?
Assessments for local improvements, such as sewers, sidewalks, or utility service extensions.
Casualty losses claimed as deductions on a tax return.
Costs incurred to demolish a building.
Section 179 expense deductions.

Answer 1

The items that increase the depreciable basis are:
- Assessments for local improvements (sewers, sidewalks, utility extensions) — capitalized to property basis.
- Costs incurred to demolish a building — capitalized and added to the basis of the land/new improvements.

The others do not increase basis:
- Casualty losses claimed as deductions reduce your tax basis (you already recognized a loss).
- Section 179 deductions reduce the asset’s basis (you expensed part of the cost).