If an asset was purchased for $10,000 and sold after $500 in depreciation and $1,000 in enhancements, what is the adjusted basis?

To determine the adjusted basis of an asset, you start with the original purchase price and then account for depreciation and any enhancements made to the asset. In this case, we begin with the purchase price of $10,000.

First, we subtract the depreciation, which is $500. This reduction reflects the wear and tear or loss in value the asset has experienced over time. So, $10,000 - $500 gives us $9,500.

Next, we account for the enhancements made to the asset, which are valued at $1,000. Enhancements are improvements that increase the value or extend the useful life of the asset, and they should be added to the adjusted basis. Thus, we add $1,000 to our previous total of $9,500, resulting in an adjusted basis of $10,500.

This method of calculating adjusted basis is essential for determining gain or loss when an asset is sold and for various tax purposes, ensuring that all factors affecting the value of the asset are accurately reflected.