P1-U06 · PART 1 · SOURCE CYCLE 2026-2027
Calculating Basis of Assets
How to complete this unit
This unit uses 22 source-gated recall cards and 23 admissible practice questions. Complete the sequence in order; the unreleased wiki prose remains outside the learner path.
- 1 · LearnBuild the rule
Answer each recall prompt before opening it. Then learn the exact rule, test the controlling facts through four quick challenges, explore common questions, and finish with one own-words teach-back.
- 2 · ApplyUse it in context
Complete at least 20 mapped questions over two sessions. Review the explanation even when the answer is correct.
- 3 · ProveTest readiness
Use the Part 1 mock under time pressure. Return here for every flagged or missed concept before the next attempt.
Verified recall questions
Only cards whose complete question and answer were checked against exact primary-authority evidence appear here. Stable unit ownership gathers this lesson across 1 textbook collection.
Q1.What is the usual basis of property an estate receives from a decedent?
Its fair market value on the date of death.
Q2.What is the basis for gain when gifted property’s fair market value is below the donor’s adjusted basis?
The donor’s adjusted basis, plus or minus required basis adjustments while the recipient holds the property.
Q3.What is the general cost basis of purchased property?
cost generally includes cash paid plus debt assumed and other amounts paid to acquire the property settlement fees and closing costs that are capital expenditures are added when they are part of the purchase basis is later adjusted for improvements, depreciation, and other required items
Q4.What is the general basis rule for gifted property?
for gain, the donee generally uses the donor's adjusted basis for loss, the donee generally uses the lesser of the donor's adjusted basis or fair market value at the time of the gift gift tax may increase basis in limited circumstances
Q5.What is the general basis of inherited property?
basis is generally the fair market value on the decedent's date of death if the estate elects alternate valuation, basis generally uses the alternate valuation date value special rules can apply to community property and income in respect of a decedent
Q6.What commonly increases or decreases adjusted basis?
capital improvements and certain assessments increase basis depreciation allowed or allowable decreases basis casualty losses, insurance reimbursements, credits, and easements may decrease basis
Q7.On January 15, 2025, Alex purchased 200 shares of Tech Innovators, Inc. for $3,900, plus an additional $100 in broker's commissions. On July 15, 2025, he sold half of the shares (100 shares) for $2,500. What is the adjusted basis of the stock he sold?
$2,000
Q8.Claudine owns a piece of land that she purchased several years ago for $250,000. The land is now worth $750,000. During the year, she borrows $500,000 from a bank to improve the property. She uses $260,000 of the loan to demolish two existing buildings on the property and clear the land for the construction of a stockyard and horse stable, which will begin next year. What is Claudine's basis in the land after the demolition is completed?
$510,000
Q9.Yoshiko owns two shares of common stock in Singleton Toys, Inc. She bought one share for $30 in 2018 and the other for $45 in 2019. In 2025, the corporation distributed two additional shares of common stock for each share held (a 3-for-1 stock split). Yoshiko owns six shares after the stock split. How is Yoshiko's basis allocated between these six shares?
Three shares have a basis of $10 each, and three have a basis of $15 each.
Q10.On May 3, 2025, Brigit purchased 1,000 shares of Equity Industries, Inc. for $5,100, including the broker's commission. On August 14, 2025, she sold 500 shares for $3,300. What is the adjusted basis of the stock she sold?
$2,550
Q11.Which of the following statements is correct about the basis of assets?
The cost basis of an asset generally includes sales tax and other expenses connected with the original purchase.
Q12.Four years ago, Rahul paid $1,050 for 100 shares of Silverton Corporation stock, plus an additional broker's commission of $50. During the year, Rahul received ten additional shares of Silverton stock as a nontaxable stock dividend. What is the adjusted basis of Rahul's stock at the end of the year?
$10 per share.
Q13.Mackenzie purchases an empty lot at auction for $50,000. She puts down $15,000 in cash and finances the remaining $35,000 with a bank loan. The lot has a $4,000 tax lien against it for unpaid property taxes, which she also agrees to pay as a condition of the sale. What is Mackenzie's basis in the lot?
$54,000
Q14.Manish buys a work truck for $15,000 to use in his carpentry business. He pays $5,000 as a down payment and takes out a five-year auto loan for the remaining $10,000. In addition, he pays sales taxes and delivery fees of $1,300 and spends an extra $250 for a protective bedliner. What is Manish's basis for the depreciation on the truck?
$16,550
Q15.During the year, Kaylie bought 52 total shares of Deerfield Corporation stock for $624. That cost included a $40 broker commission. Three months later, Deerfield Corporation issued a 2-for-1 stock split. What is her basis per share after the split?
$6 per share.
Q16.Which of the following is added to a property's basis instead of deducted on the tax return?
The cost of demolishing a building.
Q17.Which of the following is not added to the basis of property?
Points on a loan.
Q18.McCoy bought one share of Sugar City Media, Inc. on January 1 for $45. On December 20, the corporation distributed two new shares of common stock for each share held. After the split, McCoy had three shares of common stock. What is McCoy's new basis per share?
$15
Q19.Flora gifted her grandson, Clifford, a residential rental property. She purchased the property ten years ago for $120,000 and claimed $18,000 in depreciation. The fair market value of the rental house on the day of transfer was $144,000. Assuming no gift tax was paid, what is Clifford's basis in the property?
$102,000
Q20.Timothy and Susie divorced in 2025. As part of their divorce settlement, Susie transferred ownership of an expensive watch to Timothy. The watch cost $12,000, but the fair market value of the watch was $29,000 on the date of the transfer. What happens to the adjusted basis of the watch when it is transferred from Susie to Timothy due to their divorce?
The adjusted basis remains $12,000.
Q21.Vladimir wishes to sell a home that he inherited from his mother. His mother paid $45,000 for the home fifteen years ago. She put a new roof on the property two years ago at the cost of $10,500. The fair market value of the home on the date of his mother's death was $120,000. An estate tax return was not required for his mother's estate, and the alternate valuation date was not elected. What is Vladimir's basis in the inherited home?
$120,000
Q22.At the beginning of the year, Frantz bought 1,000 shares of Pharmacology Corp. stock for $4 per share. Frantz paid an additional $70 in broker's commissions on the purchase. What is his overall basis in the stock?
$4,070
Ready to move on?
- ▸ Explain at least 80% of these 22 rules without opening the answer, twice on different days.
- ▸ Score 80% across 20 or more mapped questions over two sessions, not one memorized round.
- ▸ Complete a timed Part 1 mock and return to this unit if its concepts remain flagged or missed.
Use these checks to choose your next study action. They do not predict a PSI scaled score.