Final answer:
The correct formula to calculate the adjusted basis of property is the original cost plus improvements minus depreciation. It accounts for the value added by improvements and the reduction in value due to depreciation. So, the correct answer is option b.
Step-by-step explanation:
The general formula for calculating the adjusted basis of property is given by option B: Adjusted Basis = Original Cost + Improvements - Depreciation.
To clarify, the adjusted basis starts with the original purchase price of the property (known as the original cost), and then adds the value of any improvements made to the property which can include additions or renovations that add value or prolong the property's life.
Next, subtract any depreciation taken for the property, which is the amount of value the property has lost over time due to wear, tear, or obsolescence.