@Twinbrow
It sounds like the problem with any of the permanent improvements is not going to be proving their existence but proving their cost, where your mother no longer has receipts. The county valuation may be fair, or the IRS may dispute it (In the unlikely event you are audited). The IRS does not have to give you any basis adjustment that you can’t prove, so I suppose it depends on the attitude of the particular examiner. Certainly an improvement that raise the value of the property by $30,000 is not likely to have been given to your mother for free. If audited, you will have to make the best case you can for the cost of the improvements.
The problem with the partial exclusion rule is that you have to show how you, the owner, were impacted. For example, if you and your mother lived in Los Angeles and your mother was diagnosed with a respiratory illness and was told she needed to move to a place with cleaner air, and you needed to sell your home to move with her because you were her caregiver, that would be a situation where your mother’s condition impacted your ownership of the home. You haven’t provided any facts to your story that would explain how your ownership of the home was negatively affected by your mother moving out of the home and into a care facility. I can imagine some hypothetical fact situations, but you haven’t said whether they are true. For example, if you are unemployed, and your mother gave you the home but she was paying utility bills, property taxes, and insurance, then her transition to residential care would leave you unable to pay the bills and you might have to sell the home to move into a smaller place that you could afford.
Separately, even if you can show that your mothers care situation created a negative financial impact on your ownership of the home, you must also show that it was unforeseeable at the time of the acquisition eight months prior. If it was foreseeable that your mothers medical condition might require her to move into a care facility, forcing you to sell, then you had the opportunity to make other financial arrangements that would’ve been less taxing to you. To use the exclusion, the event must create a hardship that was unforeseeable.
You may want to review your situation with an accountant or professional tax planner. You may want to gather information on your mother’s medical condition, what are prognosis was when she gave you the home, whether her decline was sudden and unexpected or part of the normal course of her condition, and so on.
