Cost Basis of Home After Multiple Moves

[rlp2451]

I moved to North Carolina for a job out of college in 1971. After renting for a couple years I bought my first house in 1974; moved into a nicer house in 1977; was transferred and bought another house in 1981; transferred again and moved to another state in 1983; again in 1985; again in 1990; again in 1997; and the final move to my current house in 2004.  I recall my first house was an assumed mortgage and I think it cost ~$28,000.  I made a little on it when I moved and each time I moved I made money, but it wasn't a lot of money; I just didn't lose any.  My current house cost $240K and is worth around $500K.  

What is my cost basis?  Do I just use the price of the last move (240 plus capital improvements, if any) or do I have to go back and figure out the adjusted basis for each one?

[VolvoGirl]

Did you report each sale on your tax returns?   Since 1997 there is a new rule, you can't rollover the profit each year.  So your 1997 and 2004 sales should have followed the new rules.

For a primary home, if you owned and lived in your house for 2 out of the last 5 years when you sell you can exclude the gain up to $250,000 for single or 500,000 for married from tax.  You can not take a loss on your tax return.  If you made more than a 250,000 (500,000 for joint) gain then the amount over it is taxed. Doesn't matter what you did with the proceeds like buy another house or pay off the mortgage

If you had a rollover profit from the sales before 1997 you had to include it on the next sale.

IRS pub 523 house sale.  Figuring Gain or Loss on page 8.

http://www.irs.gov/pub/irs-pdf/p523.pdf

[rlp2451]

If I recall correctly -but I haven't gone back to check each year, although I do have all of them stored somewhere - I reported everything I was supposed to after each move. For the sake of argument,  assume I made a profit of $10K on each move and there were 10 moves.  Would that mean my basis in the last house (the $240K one) was only $140K?

[rjs · Accepted solution]

Any gain that you postponed on earlier sales under the old law should have been subtracted from your basis on either the 1997 sale or the 2004 sale. Whichever date it was, you no longer have any postponed gain. So your basis for the house you bought in 2004 is the amount you paid for it, plus the cost of any improvements. It is not affected by any of the earlier sales.

Here is a more detailed, and somewhat confusing, explanation. But this is just background information. It does not affect the basis of your current house.

The change in the law was effective May 7, 1997, so it makes a difference whether the closing date for the sale of the house you bought in 1990 was May 6,1997 or earlier, or May 7,1997 or later. If the 1997 sale closed on or before May 6, any gain on that sale that you deferred under the old law should have been subtracted from your basis when you sold your house in 2004.

If the 1997 sale closed on May 7 or later, you could not have postponed any of the gain. Any postponed gain from earlier sales should have been subtracted from the basis of the house that you sold in 1997.

Either way, all of your postponed gain was accounted for in 1997 or 2004. And in any case, you could not have postponed any gain from the 2004 sale. So you no longer have any postponed gain, and the earlier sales do not affect the basis of the house that you are selling now.