Basis for sale of home

[JulieS]

In your case, your basis in the land is what you paid for the land  and original house (including acquisition costs), plus any improvements to the land. That means if you improved the value of the land by tearing down the old home, you can add the cost of removing the original house to the basis of the land.

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[Kham]

Thanks Julie -  

To make sure I'm understanding....let me ask my question differently....

Adding up all my capital expenses from the 1985 purchase of home and land, the tear-down costs to build new house, the cost of building the new house, the cost of the construction loan, and the costs of moving from a construction loan to a conventional loan....totaled about $368,000. 

To obtain the March 1997 conventional loan, an appraisal was required which came in at $465,000.

 So...should my basis as of 1997 be: 1) $465,000, or 2) $368,000, or 3) $368,000 plus any increase value related to only the land?  And if the answer is #3, should I be able to rely upon the 1997 appraisal's valuation of the land, or should I turn to the county tax appraiser's # (which of course is usually below market value.)?

THANKS AGAIN!

[AmyC]

An appraisal has nothing to do with the basis unless gift or death. In your case, add up all the costs, $368,000 plus any improvements you have made. Planted trees, added a fence, whatever else.

See Publication 551 (12/2022), Basis of Assets - IRS