According to income tax law, John could adjust the cost basis of his personal residence for which of the following items? A. Interest on the home loanB. Cost of adding a new garageC. DepreciationD. Cost of replacing the water heater

The correct option is B

Explanation:

According to income tax laws, an individual will pay mess capital gains tax when his basis in an asset is higher. From the example, John has a personal residence and to increase his basis, he needs to think of what to add to the residence such that the selling price would increase and thus capital gain tax will reduce. From the option, the best and likely thing that would increase the basis of his asset (the house) and lead to an increase selling price is adding a new garage.