Question

In 2018, Greg purchased an investment property in the heart of Melbourne for $150,000. He was required to pay $30,000 transfer cost in respect of the transfer of the property. He borrowed money from a bank to fund some of the purchase price and paid $25,000 in interest on the loan. He also paid $62,000 to a builder to renovate the master bedroom and driveway in the property. What’s the cost base of the property?

Select one:

a. $117,000

b. $205,000

c. $267,000

d. $150,000

Answer 1

Investment Property price	$        150,000
Add:
Transfer Cost	$          30,000
Interest Cost	$          25,000
Renovation Cost	$          62,000
Total Cost of Property	$        267,000
All Cost incurred incidental to puchase of property are included in Cost base price.
Transfer cost will be added as it is linked to purchase of property.
Since it is investment property not involved in earning business income, interest cost will be part of cost.
Expenses for renovation of bedroom and driveway are part of property since it is major improvement.
Option C	$        267,000