I have a question concerning the sale of a second home and figuring the cost basis when there is more than one owner. My wife’s mother gifted her home to her seven children in 2010 the home and land were worth $118,100.00 at that time. The house was sold by my wife and her siblings, in June 2021 for $110,000.00. My wife’s proceeds received from the sale was $15615.96
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:
Here are some examples of improvements:
And some expenses that are listed on the settlement statement can be added to the basis. These include:
It's not that simple as using the FMV of the property when given as a gift. See https://www.irs.gov/faqs/capital-gains-losses-and-sale-of-home/property-basis-sale-of-home-etc/property-basis-sale-of-home-etc