@joe1937 wrote:
I have made improvements should clearing timber, making roads, I was wanting to know how to apply to basis and what type of improvements I can use.
Was this income-producing property, such that you should have depreciated the improvements? It seems not, but I should probably ask.
Assuming this was vacant land you were holding for investment or to maybe build your own house on, then you can include the cost of improvements you paid for in your cost basis. An improvement to real property is something that enhances the value in the nature of a betterment, extends the useful life, adapts the property to a new use, or ameliorates a defect. I would think that building roads would be an improvement, especially if the purpose was to make the land suitable for further development. You can include the cost of the roads (that you paid for) plus any necessary inspections and permits. If you needed to clear the land (remove trees) to enable building the roads, that may also be an improvement, however, you would have to offset it somehow by the value of the timber if you sold it instead of just having it hauled away.
You can't include the value of your own time or labor, just costs you paid for.
There is a lot of discussion on the IRS web site about the definition of improvement, mostly in the context of deciding what counts as an improvement to commercial property that must be depreciated, but the same general principals will work for non-commercial property.
