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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

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