1099s question

[roger571]

Can I add buying driveway sealer and supplies as home improvement on my aunts house.

Thank You

[Vanessa A]

No.  That would be a maintenance cost.  Maintenance costs are not home improvements that are added to the cost basis.  A new driveway would be considered a home improvement. 

[roger571]

Do I include the Land value to the Purchase Price of the house when it was acquired? 

[DoninGA]

---

@roger571 wrote:

Do I include the Land value to the Purchase Price of the house when it was acquired? 

---

The purchase price of the home when it was initially acquired should have include the land the home was constructed on.  There is no separate land value on a home purchase, unless you are classifying the home purchase as a rental property to depreciate the building only.

[roger571]

The modular home that was put on the land was already purchased by my aunt, the original house that was there had to be torn down and was replaced with the modular home in 1999. Does that make a difference from the question before? 

[MonikaK1]

The value of the land is included in calculating basis regardless of whether there is a building on it. It could make a difference to the basis calculation if, for example, the property was worth less at the time you received the half interest than it was at the time your aunt purchased it because the modular home was worth less than the home that stood on the property when she purchased it.

The calculation of basis of gifted property depends in part on whether the property was worth more or less at the time you received it than it was at the time it was purchased.

See IRS Publication 551 for more information about calculating the basis of an asset. There is a section on property received as a gift. 

To figure the basis of property you receive as a gift, you must know:

•  its adjusted basis to the donor just before it was given to you
•  its Fair Market Value at the time it was given to you, and
•  any gift tax paid on it.

Your original basis in property is adjusted (increased or decreased) by certain events. 

If you make improvements to the property, increase your basis. 

If you take deductions for depreciation or casualty losses, reduce your basis.

If the FMV of the property is equal to or greater than the donor's adjusted basis, which is typically the case with real property, your basis is the donor's adjusted basis at the time you received the gift. In this situation, it would be what the donor paid for it . Increase your basis by all or part of any gift tax paid, depending on the date of the gift.

Example.

In 2022, you received a gift of property from your mother that had an FMV of $50,000. Her adjusted basis was $20,000. The amount of the gift for gift tax purposes was $34,000 ($50,000 minus the $16,000 annual exclusion). She paid a gift tax of $6,880. Your basis, $26,054, is figured as follows:

Fair market value       $50,000

Minus: Adjusted basis 20,000

Net increase in value $30,000

Gift tax paid                                          $6,880

Multiplied by ($30,000 ÷ $34,000)         0.88

Gift tax due to net increase in value                    $6,054

Adjusted basis of property to your mother        20,000

Your basis in the property                                  $26,054

See also this TurboTax tips article about tracking your cost basis.

@roger571