Question

For purposes of determining the adjusted basis of a capital asset at the time of its sale,

a. Ordinary repairs reduce the adjusted basis.
b. Accumulated depreciation is added to the basis.
c. The basis does not include costs such as title insurance and escrow fees related to the initial purchase.
d. Capital improvements are added to the basis.

Answer 1

Option D is correct one.

Capital improvements are added to the basis.

Step-by-step explanation:

Capital expenditure increase the capacity of the asset and an asset cannot function effectively without such improvements. Thus the value of the asset is to be increased by such expenditure. Thus, to calculate adjusted basis capital improvements are added. This is the reason of adding improvements to the basis.