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akjacket
New Member

Estimated cost basis for capital gains

My wife's brothers built a house in Texas in 1975 for their widowed mother. Title was placed in the name of all 7 brothers and sisters, including my wife. My wife's mother lived in the house for 20 years until she could no longer live by herself and came to live with us in 1996. Title was transferred to my wife and me. Mother died in 2007. We kept the house for a while as a vacation retreat but sold it last year for $144.000. Now need to pay capital gains taxes but no idea of original cost basis.  Would it be acceptable to estimate the original cost based on 2022 property tax assessment ($99,000) and using construction cost indices for 2022 and 1975 - this would result in an estimated cost of $12,000?

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5 Replies
AmyC
Employee Tax Expert

Estimated cost basis for capital gains

While building costs and appraised value can vary, you have a reasonable method. If the IRS asks, you have a foundation that is logical.

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akjacket
New Member

Estimated cost basis for capital gains

Thanks.  How likely do you think it is that the IRS will ask?

AmyC
Employee Tax Expert

Estimated cost basis for capital gains

Not very and if they do, you have a good answer. You aren't claiming any improvements over time and in that many years, there probably were some. It might be worth doing a little thinking and photo looking. I like pictures because they will show the new fence or tree or room, etc.

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akjacket
New Member

Estimated cost basis for capital gains

Thanks.  We are claiming some improvements: $4,450 for deck replacement and a couple thousand for roof repairs.  With $11,000 or so closing costs, our cost basis will be up to around $30,000.  I hope that doesn't draw to much attention to our little transaction 🙂

PattiF
Expert Alumni

Estimated cost basis for capital gains

The cost for the improvements for the deck replacement and root repairs is very reasonable. The cost basis amount should not trigger any red flags with these figures.

 

@akjacket 

 

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