calculating basis on primary home owned for 40+ years

[Opus 17]

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@aem1337 wrote:

I was going through the formula and realized FMV at time of death was not (obviously) included. Would I add the cost basis as of 2019 to step up basis to get the DOD value? 

For example:

  price of home 30k

   + cost to buy - 2k (etimating real estate fees at time)

 + improvements thru 2019 - 100k (estimate)

= cost basis as of 2019- $132k

Would i then add FMV at time of death (~450k from zillow/redfin) to the cost basis (132k) to get DOD value (582k)? 

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Think of it as 2 half-houses.

As of 2019, father's basis was $61K  $66K and mother's basis was $61K $66K.  When your father died, your mother inherited your father's half of the house at then-FMV (half of $450K = $225K) but her half basis is the same at $61K $66K, so her new basis is $286K $291K. 

Also remember that although you can make reasonable estimates of the cost of improvements when you file, if you are audited, the IRS does not have to award any basis adjustments that can't be proven with reliable records. 

[Anonymous_]

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@Opus 17 wrote:

Also remember that although you can make reasonable estimates of improvements when you file, if you are audited, the IRS does not have to award any basis adjustments that can't be proven with reliable records. 

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I agree with the statement above; your mother will need documentation of some sort for the costs of improvements made during your mother's period of ownership in the event the IRS questions the basis your mother reported.

Further, the IRS does not have to accept the FMV as reported by the likes of a Redfin or Zillow; they only have to accept an appraisal by a certified real estate appraiser and, frankly, the appraiser, knowing it is a DOD appraisal, may arrive at a higher figure (which is better for your mother in any event).

Finally, I believe the basis figure would be $66k for your father and $66k for your mother initially, for a total of $132k (unless my math is out of whack).

[Opus 17]

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@Anonymous_ wrote:

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Finally, I believe the basis figure would be $66k for your father and $66k for your mother initially, for a total of $132k (unless my math is out of whack).

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Yes, I did that in my head and got it wrong, of course.