Empire Corporation purchased an office building for $500,000 cash on April 1.Prior to renting it out to tenants on July 1,Empire spent $200,000 on materials and labor to renovate the property.It funded $50,000 of the renovation cost with its own funds and borrowed the remaining $150,000.As of July 1,$2,000 of interest had been paid to the bank,but none of the principal had been repaid.The basis of the building on July 1 is

Question

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C)The basis of the building when placed in service on July 1 will include the $500,000 cost plus the $200,000 of improvements and the $2,000 of construction period interest.

Empire Corporation Purchased an Office Building for $500,000 Cash on April