Need help to figure capital gains on gifted real estate

[uml1576]

My mom inherited a home in 1985 that had no mortgage. In 1987 she added my name to the deed. I know she did not make any improvements prior to adding my name. The home was sold in 2022 as my mom is now in assisted living. Is the cost bases 0 since she inherited the home? She made many improvements after my name was on the deed but I have no receipts. I do not know FMV from 1987. Do I just 0 as my adjusted basis since that was what she paid for the home? 

[DMarkM1]

No.  Zero is not the right answer; there is some cost basis in the property.  When she inherited the home in 1985 the fair market value of the home then became her cost basis.  Hopefully somewhere in the house documents there is a value back in 1985.  You can also look at tax records for 1985 on the property to at least get some basis established.  

Next, when your name was added to the deed 1/2 of the basis at that time became yours.  If you lived in the home for at least 24 months in the last five years prior to the sale then you can claim an exclusion of up to $250K on your part of the gain.  

Finally, I assume your mom did live in the home for 24 months in the last five years so she will have up to a $250K exclusion on her part of the gain on her taxes.

As you mention receipts are the best support of the cost of  improvements.  However, typically should you ever be audited on the sale, the IRS can accept reasonable estimates for the cost of improvements. 

[uml1576]

Using 1985 tax assessment records property valued at 23,330.  After pulling old deed I have discovered my name was added 1 year later than I thought. During this year my mom made major upgrades to the home (kitchen, bathroom and rewiring) Ball park number $5,000 (no receipts) just based on mother's memory and what I remembered was done to home as I was living there. Since there are no receipts from 30+ years ago does the IRS allow any kind of allowance for this? 

For turbo tax entries:

My half of cost proceeds (1099S) = 62,500.

Cost or other basis: 23,330 (1985 property value) + 5,000 home renovations (= 28,330) prior to being gifted to me. Can I take all this amount or only 1/2 (14,165)?

I know I can only take 1/2 of commission and fees on the less common adjustments page when property sold.

[uml1576]

One more question - Can I take 1/2 of the cost of home renovations (new roof and new furnace) that were made after my name was added to the deed? 

Would this also be added to the cost or other basis section in Turbo Tax?

[JulieS]

No, your cost basis is half of the fair market value (FMV) plus improvements or $14,165.

You are correct that you can only use half of the commission and fees on the less common adjustments page when the property sold.

You can add the cost of home renovations (new roof and new furnace) that were made after your name was added to the deed only if you paid for it. You can add the amount that you paid to the basis of the property. Click here to learn more.