Which of the following best describes adjusted basis?

Adjusted basis refers to the original value of an asset, such as property, adjusted for various factors over time. These factors can include costs related to improvements, depreciation, or other modifications that affect the asset's value. Thus, the correct description of adjusted basis is the basis modified by costs and adjustments, which gives a more accurate reflection of the current value of an asset for taxation purposes.

When determining the adjusted basis of a property, one does not only consider the initial purchase price but also any additional investments or deductions made regarding that property throughout the ownership period. This comprehensive approach is essential when calculating capital gains or losses upon sale, as it helps establish the actual profit or loss that a taxpayer may realize.

For instance, if a homeowner made significant improvements or renovations, those costs would be added to the original purchase price, thereby increasing the adjusted basis. Conversely, if the property were depreciated for tax purposes, this would reduce the adjusted basis.

In contrast, the other options do not represent adjusted basis accurately. The current market value refers to what the property could be sold for in the marketplace, which does not factor in the historical costs and necessary adjustments that define adjusted basis. The initial purchase price only captures the upfront cost and does not account for any