Which of the following events causes the purchaser of an option to add the cost of the option to the basis of the property to which the option relates?
A) The option is exercised.
B) The option is sold.
C) The option lapses.
D) The option is rescinded.
E) None of the above.

Question

Quizplus · Accepted Answer

When the option is exercised, the cost of the option is added to the basis of the property to which the option relates. This is because the purchaser has ultimately acquired the property and the cost of the option is considered as part of the cost of acquiring the property. None of the other options listed (selling the option, letting it lapse, or rescinding it) would result in the option cost being added to the basis of the property.

Which of the Following Events Causes the Purchaser of an Option