Which of the following adds to the adjusted basis of a property?

Prepare for the HandR Block Income Tax Exam. Master crucial concepts with our interactive quizzes, featuring detailed explanations and real-world scenarios. Enhance your skills and build confidence for the exam. Success awaits you!

The cost of restoration after a casualty is correctly identified as something that adds to the adjusted basis of a property. When a property incurs damage from a casualty event, the expenses incurred to restore the property to its prior condition or its fair market value can increase the property's adjusted basis. This is important because a higher basis can potentially reduce capital gains when the property is sold, as it represents a higher investment in the asset.

In the context of the other options, insurance reimbursement for damages does not add to the adjusted basis; rather, it compensates for the loss and typically reduces the basis. The original purchase price is part of the initial basis but does not add to it since the question specifically seeks additions. Future market values are not a consideration in calculating the adjusted basis, as they represent speculation rather than actual costs or investments made in the property.

Subscribe

Get the latest from Examzify

You can unsubscribe at any time. Read our privacy policy