Which of the following events causes the purchaser of an option to add the cost of the option to the basis of the property to which the option relates?
a. The option is exercised.
b. The option is sold.
c. The option lapses.
d. The option is rescinded.
e. None of the above.
a
RATIONALE: If the option is exercised, the cost of the option becomes part of the basis of the property. Otherwise, the lapse of the option is treated as a sale or exchange.
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