Question

purchased a business asset 5-year property on March 10, 2019, at a cost of $90,000. She did not elect to expense any of the cost under Section 179 and elected out of bonus depreciation, sold the asset on January 20, 2020. What is the adjusted basis in the asset at the time of sale?

Answer 1

Adjusted basis of an asset is the adjusted cost of asset calculated at the time of sale of the asset in order to calculate the gain or loss from sale of asset by comparing same with sale price. Same is useful for tax implications on gain/loss on sale of asset. Adjusted basis is calculated by adding certain items to the original cost of asset such as additional cost incurred for improvement of asset, legal fees, impact fees, etc. and reducing certain items such as Section 179 deductions, certain tax credits, deductions for depreciation etc.

The adjusted basis is calculated by taking the original cost, adding the cost for improvements and related expenses and subtracting any deductions taken for depreciation and depletion.

Since, in the case in question, no additional improvement costs etc. are incurred to increase the adjusted basis and no Section 179 depreciation deduction is claimed to reduce the adjusted basis, the adjusted basis for this asset at the time of sale will be same as original cost,i.e, $90,000.