Bought my house in 1986 for 79,000. Divorced in 1999 and refincanced at 186000 converted to rental in 2008 and sold in 2021 for 311000 - what is cost basis?

Forum|Forum|4 years ago
February 7, 2022
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TurboTax Online

DanaB27

Level 15

Your cost basis is your purchase price of $79,000.

Your adjusted basis is your purchase price of $79,000, plus the cost of improvement, minus depreciation when it was used as a rental property.

Please see Basis Adjustments for additional information.

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Hal_Al

Level 15

Simple answer $79,000. But, if you "bought out" your ex, at the time of the divorce, your cost basis would be $39,500 (half the original 79K) plus the buy out amount.

The refinancing is irrelevant. So, you will pay capital gains tax on $311,000 - your cost basis (less expenses of sale). In addition, you will be taxed on the depreciation recapture (the depreciation you claimed, or shoulda claimed over the years). Depreciation recapture is taxed at ordinary income rates but not more than 25%.