Cost Basis for House Sale


D

Don_

I sold a house I owned for 50 years. I did not live in it,
so I have to pay the capital gains tax on it.

For establishing my cost basis, I do NOT have receipts for
all the improvements I put in during the 50 years.

Does the IRS have some kind of general formula or guideline
I could use for esablishing my cost basis? Is it referred
to in any IRS publication??

Thanks to anyone who can advise me.
 
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F

Frank S. Duke, Jr.

Don_ at engguy58NOSPAM@hotmail.com said:
I sold a house I owned for 50 years. I did not live in it,
so I have to pay the capital gains tax on it.

For establishing my cost basis, I do NOT have receipts for
all the improvements I put in during the 50 years.

Does the IRS have some kind of general formula or guideline
I could use for esablishing my cost basis? Is it referred
to in any IRS publication??
At worst the basis is $0 and you owe 15% of the sale price.
Assuming you rented it, if you didn't live in it, you most
likely took depreciation. Unless you made regular
improvements over time, there is a good chance the basis is
$0 because you fully depreciated it.

From there, the basis is what you can convincingly say it
was. Picture yourself as the IRS agent on the other side of
the table. Can you be believable enough to convince
yourself? Writing up a timeline with various improvements
and your best recollection of them might be helpful. The
IRS does not have to accept it but if it is believable, the
might.

All freely provided advice guarantee correct or double your
money back

Frank S. Duke, Jr. CPA
Cincinnati, OH USA
 
H

Helen P. OPlanick EA

I sold a house I owned for 50 years. I did not live in it,
so I have to pay the capital gains tax on it.

For establishing my cost basis, I do NOT have receipts for
all the improvements I put in during the 50 years.

Does the IRS have some kind of general formula or guideline
I could use for esablishing my cost basis? Is it referred
to in any IRS publication??
No formula, but I have heard of cases where you can have
witnesses tell of the work you did and the price range for
that period of time. Pictures help too.

Helen, EA in PA
Member of The Tax Gang
Director, National Assoication of Enrolled Agents
Immediate Past President, PA Society of Enrolled Agents
 
H

Herb Smith

Don_ said:
I sold a house I owned for 50 years. I did not live in it,
so I have to pay the capital gains tax on it.
If you have owned the house for that long, and I assume
rented it out, depreciation has likely reduced your original
cost basis to essentially zero. Any net proceeds of sale
would be fully taxable.
For establishing my cost basis, I do NOT have receipts for
all the improvements I put in during the 50 years.
Your bad. Without receipts for the improvements, any cost
basis adjustments would likely be disallowed on audit.
Does the IRS have some kind of general formula or guideline
I could use for esablishing my cost basis? Is it referred
to in any IRS publication??
Pubs 544 and 551 may offer you some guidance in this area,
but without receipts you are on thin ice.
 
D

D. Stussy

Don_ said:
I sold a house I owned for 50 years. I did not live in it,
so I have to pay the capital gains tax on it.

For establishing my cost basis, I do NOT have receipts for
all the improvements I put in during the 50 years.

Does the IRS have some kind of general formula or guideline
I could use for esablishing my cost basis? Is it referred
to in any IRS publication??
No, they don't. You need to add up what you have and use
that. If you feel that your basis is higher due to
additions where you no longer have the records, you may
estimate, but should the IRS challenge that on audit, you
will probably lose those. You were supposed to keep
records.
 
F

Frederick Jorden

D. Stussy said:
Don_ wrote:
No, they don't. You need to add up what you have and use
that. If you feel that your basis is higher due to
additions where you no longer have the records, you may
estimate, but should the IRS challenge that on audit, you
will probably lose those. You were supposed to keep
records.
The question as to a possible challenge if probably related
to how reasonable the estimates are. With all the inflation
we have had the estimates should not be based on current
prices but what the improvements would have cost at the time
they were made. As someone has said previously photos will
help substantiate the improvements. Additionally the value
of the owners labor is not included in the total.
 
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C

CBotella

For establishing my cost basis, I do NOT have receipts for
Wouldn't these improvements also have been depreciated over
the years? That would still bring your basis to zero!

Kate Botella, EA in PA
 
F

Frederick Jorden

For establishing my cost basis, I do NOT have receipts for
Wouldn't these improvements also have been depreciated over
the years? That would still bring your basis to zero!
Who said the house was a rental property. If it was a rental
property the the basis would have been determined by the
taxpayer for depreciation. If it was a rental property that
was not depreciation then the allowed or allowable rule
would kick in. The house may have been occupied by a
relative gratis.
 
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H

Harlan Lunsford

For establishing my cost basis, I do NOT have receipts for
Wouldn't these improvements also have been depreciated over
the years? That would still bring your basis to zero!
If it had been rental or business property, sure.
(He didn't say)

Cheer$,
Harlan Lunsford, EA n LA
 

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