Get your taxes done using TurboTax

1. Yes for question one you will add the new roof and driveway at the full cost of $10,000, to the cost basis of the second home.

2. Normally transfers between spouses in a divorce settlement are not taxable by the recipient and not deductible by the payer.  If this was fees to transfer the property in the name of your spouse it will not be part of the cost basis of the second home.  Her cost basis will be the original cost they paid for it.  The basis in property received from your spouse (or former spouse, if incident to your divorce) is the same as your spouse's adjusted basis. This applies for determining either gain or loss when you later dispose of the property.

3. Cleaning and repairs are normal maintenance and not allowed to be used as selling expenses. Expenses you incur that physically affect the home are not deductible from the sales proceeds, even if they help sell the property. For example, you can't deduct the cost of cleaning the carpets in your home, repainting, or hiring a lawncare. .You can use any settlement fees such as commissions, legal fees as part of your sales expenses.

4. My wife, her sister, and I all spent time to repair and clean the house for it to be ready to sell.  Can we report the time that we spent as part of the cost basis?   No, the IRS specifically states that your own labor is not allowed to be used for any tax purpose.

5. The second home sale can be entered into TurboTax CD or Desktop version by following the steps below. (See the third image)

1. Open your TurboTax account > Wages & Income 
2. Scroll to Investment Income > Select Stocks, Mutual Funds, Bonds, Other > Start or Update
3. Select the type of sale (see image below)
4. Enter the details of the property sold - Select Second Home from the dropdown continue to enter your information
5. Continue to finish your sale.  
6. See the images below.

The gain from the sale will be fully taxable because a second home is not eligible for the home sale exclusion. See the image below for assistance. Whether you specifically select Second Home is not relevant for the tax return itself.