Calculating cost basis for a house that was sold in 2016.

bedner824 · ‎June 4, 2019

The house that was sold is 50+ years old. Over the years there were many improvements to the home. ie: adding a second level, garage, sun room. How do I calculate the cost basis when the improvements were done 40 years ago? The person who did the construction is deceased. ??

KenH1 · ‎June 4, 2019

You should make conservative estimates of the improvements and add it to the cost basis. The IRS is unlikely to complain, given the time period involved, as long as they are reasonable.

Of course, if the gain, without the adjustment to cost basis, will be less than $250,000 ($500,000 if filing jointly), then there is no need to estimate at all because the entire gain will be excludable. It won't matter if the gain is $1 or $249,999.

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KenH1 · ‎June 4, 2019

You should make conservative estimates of the improvements and add it to the cost basis. The IRS is unlikely to complain, given the time period involved, as long as they are reasonable.

Of course, if the gain, without the adjustment to cost basis, will be less than $250,000 ($500,000 if filing jointly), then there is no need to estimate at all because the entire gain will be excludable. It won't matter if the gain is $1 or $249,999.