Add the cost of the improvements as part of your purchase price. You can increase your cost basis by the purchase ( and sales) expenses and those would be:
- Real estate commissions
- Transfer tax
- Legal fees
- Advertising fees
- Home inspection reports
- Title insurance
- Geological surveys
- Loan charges (points) or other fees paid on the buyer's behalf
Sales expenses do not include:
- Mortgage payoffs
- Home equity loan payoffs
- Rent-back costs
- Payoff to creditors
- Property taxes
- Home owner association fees
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