The Thompson family has purchased a home for $74,500, making improvements of $5,000 for a fireplace, $1,500 for a new driveway, and $800 for painting. What is the adjusted basis of their home? (A) $76,000 (B) $81,000 (C) $81,800 (D) $82,000

Option B. $81,000

Step-by-step explanation:

The Thompson family has purchased a home for $74,500, making improvements of

Fireplace = $5,000

a new driveway = $1,500

Painting = $800

The paining is not considered a capital expense so ignore that part of the equation and add the following.

The adjusted basis of their home = 74,500 + 5,000 + 1,500

= $81,000

Option B. is the answer.