I can't follow your story. You first said you bought a property with one home, then subdivided the property, and built a second home. You now live in the second home, and want to sell the first home. Now you say you bought a property with no house on it? You built a house and it later appraised for some value?
Please confirm the details of what happened and when.
In any case, the cost basis of a house you built is the cost of the land, plus the cost of things you did to build the home. For example, you can include the cost of architect plans, required permits and inspections, and labor and materials that you paid for. You can't include anything for the value of your time and labor. The appraised value and mortgage amount are not useful for this determination. What counts is what you can prove your costs were. And as I have said already, if you are audited, the IRS does not have to allow any basis that you can't prove. They might allow a reasonable estimate (you can't build a house for $1), but if you have no proof, you have no influence with the IRS as to what basis they allow you, it will be whatever they determine is proper.
