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[Event] Ask the Experts: Investments: Stocks, Crypto, & More
Your Adjusted Basis will be: Original Cost + Capital Improvements - Depreciation.
For the Original Cost: You will have to look at closing Documents or property tax records for the purchase price.
Capital Improvements: You can increase your basis by the cost of major renovations (e.g., kitchen remodels, new roof, room additions). Since you don’t have receipts, the IRS allows you to reconstruct estimates using:
- Old bank or credit card statements
- Permits or contractor records
- Photos with timestamps
- Insurance records
- Affidavits or written statements from contractors
Depreciation from Prior Tax Returns (Form 4506-T): This is your best first step. You can request tax transcripts from the IRS for past years. You can go back quite a few years, though there might be a limit. You will have to look at the Form 1040, SCH E, Form 4562 for depreciation details, Form 8582 for passive activity losses for details about the rental.
If you don’t have records:
- Estimate the rental period
- Estimate the value of the building only (not land) at the time it was placed in service.
- Use the IRS depreciation schedule (typically 27.5 years for residential rental property)
This does sound like a challenging situation with rental use, personal use & missing records. Hope this helps!!
@user17524923356 Thanks for the question!!
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