Investors & landlords

The cost basis for the home is the value of the property in 2010. There are other expenses like improvements and charges listed on the settlement statement that are added to the basis. It seems that the property was sold at a small loss. If you add any improvements or amounts from the settlement statement to the basis, the capital loss will be a little greater.

All of the amounts would be divided by 7 to represent all of the siblings. The basis (and possibly the adjusted basis with additional amounts)  would be divided by seven. Make sure that none of the settlement charges were deducted from the amount that the siblings received from the proceeds because you don't want to "double-dip".

Home improvements may come into play when you sell your home because they're included in your home's adjusted cost basis. The bigger your basis, the smaller your capital gain, and that mean less tax.

To qualify as an increase in the adjusted basis when you sell, the home improvement must:

• Add materially to the value of your home; or
• Prolong your home's useful life significantly; or
• Adapt your home to new uses

Here are some examples of improvements:

• Remodels and room additions (including decks and porches)
• New or upgraded landscaping, irrigation, sprinkler system
• Hardscape such as pavement, block or retaining wall, patio
• Fencing
• Storm windows, doors
• New roof
• Upgraded wiring, plumbing, ductwork
• Central heating, AC, humidifier
• New furnace, water heater
• Filtration, soft-water, or septic system
• Built-in appliances
• New flooring or wall-to-wall carpeting
• Upgraded insulation

And some expenses that are listed on the settlement statement can be added to the basis. These include:

• Title fees
• real estate commissions
• documentary stamps
• credit report costs
• costs of an abstract
• transfer taxes
• home inspection
• flood certificate
• attorney fees, etc.