Steve purchased his home for $500,000. As a sole proprietor, he operates a certi

Question

Steve purchased his home for $500,000. As a sole proprietor, he operates a certified public accounting practice in his home. For this business, he uses one room exclusively and regularly as a home office. In year 1, $3,042 of depreciation expense on the home office was deducted on his income tax return. In year 2, Steve sustained losses in his business; therefore, no depreciation was taken on the home office. Had he been allowed to deduct depreciation expense, his depreciation expense would have been $3,175. What is the adjusted basis in the home?

$493,783

$496,825

$496,958

$500,000

None of the above

Explanation / Answer

a. $493783

Explanation :

$500000-$3042-$3175 = $493873

As credit for unabsorbed depreciation will be given from the cost of house on an adjusted basis/

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