Question

which item below is added to the original basis to arrive at the adjusted basis ?

discount , rebates, or reimbursements of the purchase price

the cost of capital improvements

insurance reimbursements for property damage

any tax credits received through ownership of the asset

2. Olga 20 is a full time student , eligible to be claimed as dependent on her moms return. this year Olga incurred 2000 in educational expenses for her tuition . if Olga mother choice to claim exemption. which is true

Olga may claim educational credit or tuition and fees deduction and may also claim her own dependency exemption

Olga may claim educational credit or tuition and fees deduction , but she may not claim her own dependency exemption

Olga may claim educational credit , but she may not claim the tuition and fees or her own exemption

Olga may not claim an educational credit , tuition and fees deduction , or her own exemption

Answer 1

1. Cost of capital improvements

To arrive at the adjusted basis (that is Net asset value) one should add back any capital expenditure made and deduct depreciation expenses.

Here, cost of capital improvements are the capital expenditure incurred which should be added back to the original basis (cost) to arrive at the adjusted basis.

2. Olga may claim educational credit or tuition and fees deduction and may also claim her own dependency exemption

She is allowed to claim only one type of education expense either education tax credit or the tution and fees deduction. Apart from this she can claim dependency exemption subject to the limits.