Questions and Problems

4. Jocasta owns an apartment complex that she purchased 6 years ago for $750,000. Jocasta

has made $50,000 of capital improvements on the complex, and her depreciation claimed

on the building to date is $128,700. Calculate Jocasta's adjusted basis in the building.

Adjusted Basis = $571,300

Explanation:

Given.

Amount Procured = $750,000

Capital Improvement = $50,000

Depreciation = $128,700

Adjusted basis is the net cost of an asset after adjusting for various tax-related items.

In other words, it is the original cost or other basis of property, reduced by depreciation deductions and increased by capital expenditures.

Calculating Jocasta's adjusted basis in the building.

= Amount Procured - Depreciation - Capital Improvement

= $750,000 - $128,700 - $50,000

= $571,300