Which of the following is included in the adjusted basis calculation for real estate?

The adjusted basis of real estate is primarily used to calculate capital gains or losses when the property is sold. It takes into account several factors that affect the actual investment in the property over time. The original cost of the property is a foundational element in this calculation because it represents the starting point of your investment.

This original cost includes not only the purchase price but also associated costs such as acquisition fees, closing costs, and any significant improvements made to the property that enhance its value. Therefore, including the original cost in the adjusted basis ensures that you are accurately reflecting the true financial input into the property when determining tax implications.

Other options, such as current market value, future planned improvements, and rental income history, do not form part of the adjusted basis itself. The market value fluctuates and does not directly impact the basis for tax calculations. Future improvements may increase the adjusted basis if undertaken, but are not counted until they are completed and the costs are known. Rental income history reflects returns on the investment rather than costs related to acquiring or maintaining the property.