Final answer:
The adjusted basis of an asset is calculated by taking the original purchase price, adding the costs of significant improvements, and subtracting any depreciation that was allowed or allowable on your tax returns.
Step-by-step explanation:
To determine an asset's adjusted basis, you should use the following calculation: original basis plus any significant improvements made to the asset, less any depreciation allowed or allowable. Therefore, the correct calculation is:
C. Original basis + significant improvements - depreciation allowed or allowable
This means that you take the original purchase price of the asset (or other basis if not purchased), add the cost of any capital improvements that add value, prolong its life, or adapt it to a new use, and then subtract any depreciation that you have claimed or could have claimed on your tax returns.