Question

Grayson purchased his primary residence for $260,000. as part of the closing procedure, he paid $2,900 in loan origination fees, $750 to a lawyer to review the purchase contract and other closing papers, $250 for a property survey, and $1,200 for title insurance. he also gave the real estate agent a $100 gift certificate in appreciation for her hard work. what is grayson's basis in the residence?

O $260,000
O $261,200
O $262,200
O $263,000

Answer 1

Grayson's basis in the residence is $265,100, which includes the purchase price and allowable closing costs such as loan origination fees, lawyer's fees, property survey, and title insurance, but not the gift certificate.

Step-by-step explanation:

Grayson's basis in the residence is $265,100. This includes the purchase price plus allowable closing costs.

The calculation of a property's basis includes the purchase price and certain purchase-related expenses. In Grayson's case, the loan origination fees ($2,900), lawyer's fees ($750), property survey ($250), and title insurance ($1,200) are all added to the original purchase price ($260,000), as they are directly associated with the acquisition of the property. However, the $100 gift certificate to the real estate agent is not added since it is not a required closing cost.

Thus, Grayson’s adjusted basis for his primary residence is the sum of all these amounts except the gift certificate.