The stepped up basis, or fair market value (FMV) is the amount the house would sell for on the date of death based on real estate sales of similar property in the area and in the condition of the inherited home.
The expenses to prepare the home for sale can be added to that FMV or included as part of your selling expenses, both of which would reduce or eliminate gain. Many of your repairs were capital improvements, and some maintenance. Capital improvements would definitely be added to the FMV (anything that is part of the structure including remodel) and maintenance costs would be selling expense. The end result of gain or loss will be the same using your total expenses.
- See IRS Publication 523 - Worksheet 2, Step 2 Selling Expenses
- For maintenance costs it would fall into the 'Other' category
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