You could report this is a couple different ways.
If you haven't been reporting Rental Income and Expenses, you could now report the sale as the Sale of a Second Home (an investment sale).
Since the value of the property was valued at 75K when you sold it for 70K, you have no Capital Gains to report. You can't claim a loss on personal property.
Your Cost Basis for the Sale was the 35K you paid for it, plus the 40K of improvements you added to it. The only caveat is that you have no receipts for the 40K you spent, if they were requested.
Or, you can enter the property as a Rental Property, with a beginning Cost Basis of 75K; however, unless you have rental income and expense receipts for the period you rented, the first option would be easier.
@ishyronosova
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