Which of the following would affect a homeowner's adjusted basis?

Which of the following would affect a homeowner's adjusted basis?

• A. Installing a new furnace
• B. Replacing a washing machine
• C. Stripping and staining hardwood floors
• D. Replacing a broken picture window

Answer: (A)

The adjusted basis of a property is primarily influenced by improvements made to the home rather than routine repairs. Installing a new furnace is an example of a significant improvement because it enhances the home's overall value and longevity. Improvements like this are usually capital expenditures that increase the adjusted basis of the property for tax purposes, potentially impacting future capital gains calculations when the property is sold. In contrast, routine maintenance or minor repairs—such as replacing a washing machine or repairing a broken window—do not generally affect the adjusted basis since they do not add significant value to the property or extend its useful life. Stripping and staining hardwood floors, while it may refresh the appearance of the floors, is often regarded as maintenance rather than a permanent enhancement that would alter the property's adjusted basis in the same way as a new furnace installation does.

The adjusted basis of a property is primarily influenced by improvements made to the home rather than routine repairs. Installing a new furnace is an example of a significant improvement because it enhances the home's overall value and longevity. Improvements like this are usually capital expenditures that increase the adjusted basis of the property for tax purposes, potentially impacting future capital gains calculations when the property is sold.

In contrast, routine maintenance or minor repairs—such as replacing a washing machine or repairing a broken window—do not generally affect the adjusted basis since they do not add significant value to the property or extend its useful life. Stripping and staining hardwood floors, while it may refresh the appearance of the floors, is often regarded as maintenance rather than a permanent enhancement that would alter the property's adjusted basis in the same way as a new furnace installation does.