On February 1, Karin purchases real estate for $375,000. The annual property taxes of $5,000 are payable on December 31. Realizing that she will pay the property taxes for the entire year, Karin remits $374,575 to the seller at closing. Karin's adjusted basis for the real estate is:

Question

Quizplus · Accepted Answer

Karin's adjusted basis would be the purchase price of $375,000 minus any closing costs and add any improvements made to the property. The fact that she paid the property taxes for the entire year would not affect her adjusted basis. Therefore, her adjusted basis would be the purchase price of $375,000.

On February 1, Karin Purchases Real Estate for $375,000