Your cost is calculated as follows based on your numbers in your first question.
- Original cost after gift given to X - $158,000 x 50% = $79,000 (each has the same cost basis w/o considering depreciation)
- Buy out - $155,000 + $79,000 = $234,000 = Total cost basis before any depreciation and should be used to calculate sales price for building, land and any other assets.
You would allocate the sales price to any improvements that have been added as a separate asset in your rental activity, then apply that sales price and sales expense to the improvements just like you do for the house and the land. If you do not have any capital improvements as an asset, then you would use only the assets you have in your rental activity.
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