Adjusted Basis In The Home 538534

John purchased his home in 1995 for $600,000, consisting of $400,000 cash plus $200,000 he borrowed from The Bank. The Bank took back a $200,000 mortgage on the property. In 2005, when John’s home was worth $850,000, Tom refinanced his home and got a $650,000 mortgage from The Savings and Loan Bank. The Savings and Loan Bank paid off The Bank mortgage and took back a $650,000 mortgage on the property. John used $150,000 of the refinance money to build an extension on the home. John’s adjusted basis in the his home is:

a.$600,000

b.$850,000

c.$650,000

d.$1,250,000

e.none of the above