Question

Jack purchased a new house 3 years ago. The purchase price were the following:

Purchase price $280,000, Title fees $700, Recording Fees $300 , Survey Fee $1,000, Appraisal Fees $250, Escrow fees $500

Additional renovations $27,000, His home office expenses $3,000

What is Jacks adjusted basis in the house?

Answer 1

Answer

The adjusted basis of an asset is its cost after you've adjusted for various tax issues. This is often a good thing because the higher your basis in an asset, the less you'll pay in capital gains tax when you sell it. Of course, it can work the other way, too. Just as some adjustments can increase your basis in an asset, others reduce it and this generally is not a good thing at tax time. You'll pay capital gains tax or have a capital loss based on the difference between your adjusted basis and the amount for which you sell the asset.

However, the appraisal fees and amount spent on house office expenses doesn't form part of adjusted basis for tax purpose.