If so, is there a limit the IRS accepts for cash paid out to contract help with no receipts in reflecting improvement costs ?
Yes, improvements are added to the basis. Everything in your basis should have receipts or records of some type. I have contractor's sign the cash envelope with the amount paid. You may have bank withdrawal records.
Thank you. Such payments of cash went on for about 10 years. I had never thought I would sell the land so at the time, pay outs did not matter. I have spent several thousand in cash. The area it is located in is rural small town - very poor county. When getting land cleared or building cleaned or worked on - the locals were happy with “cash” and no receipts or checks. I have photos of all work and land clean up and bank cash withdrawals but no receipts from any one. My big concern is if there is a limit of “cash paid out” for property improvements and a list of what can be deducted. Sure appreciate any knowledge. The land was passed on to me but after 10 years and it being 800 miles away - it had become a money pit. Now, I sure hate to be taxed on selling it when 60% of what I got for it was spent on it - plus all the travel to the area 3-5 times a year for 10 years (hotels and fuel)
Thanks! Is there a limit amount per year one can claim as cash paid to contractor? bank statements of cash with-draw is available. I have paid in cash for many years of land development (of the now sold property) thanks much?.
Yes, the limit on cash paid out without a receipt that is deductible is $0. The IRS requires a paper trail in order to prove any number is real and photos of the improvements and cash withdrawals do not cover it. The IRS would consider cash payments with no receipts as gifts given to the people who worked on your property unless they paid taxes on the money that you paid them.