HANDLING EXPENSES INCURRED IN ACQUIRING A RESIDENCE

The homebuyer should keep track of all expenditures that he or she can add to basis since they may provide a tax benefit on a subsequent sale of the property. Often records of costs associated with a home purchase and subsequent improvements are lost over the years, causing the taxpayer to understat...

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Bibliographic Details
Published in:The Tax Adviser 2012-11, Vol.43 (11), p.770
Format: Article
Language:English
Subjects:
Delinquency
Documentation
Expenditures
Property taxes
Purchasing
Sale or exchange of residence
State court decisions
Tax basis
Tax courts
Tax planning
Taxpayers
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Summary:The homebuyer should keep track of all expenditures that he or she can add to basis since they may provide a tax benefit on a subsequent sale of the property. Often records of costs associated with a home purchase and subsequent improvements are lost over the years, causing the taxpayer to understate the basis of the residence when it is sold. This leads to an overstated gain on the sale. With the $250,000 ($500,000 if married filing jointly) gain exclusion, this may be less of an issue. However, if a taxpayer converts a home to rental, investment, or office use; has a gain in excess of the dollar limitation under the exclusion provisions; or sells more than one home within a two-year period, basis records will be needed to verify tax basis for reporting the proper gain in a future sale of the residence.
ISSN:0039-9957