What is Valarie's basis in the house after purchasing a rental property?

To determine Valarie's basis in the house after purchasing a rental property, it is necessary to understand that the basis for property is usually its purchase price, which may be adjusted by additional costs associated with acquiring the property. This basis can include not only the amount paid for the property but also other factors such as acquisition costs, financing fees, and certain improvements made to the property post-purchase.

In this context, if the correct answer reflects a basis of $126,000, this amount likely represents either the purchase price of the house or a calculated figure after considering relevant adjustments to the initial price. Such adjustments could include deducting any costs or considering allowable depreciation based on the property being used as a rental.

The other amounts do not align with the basic calculations or adjustments that would typically apply in real estate transactions involving rental properties, indicating that those figures may either include irrelevant costs or overstate the actual basis Valarie would have in the property.

Understanding this foundational principle of tax basis is crucial for accurately assessing the potential gains or losses on the property when it comes to future sales or depreciations in rental income.