That is correct. The reason is that as individual tax payers, we are on cash accounting. It would be extremely unusual to find someone on accrual accounting as an individual. The IRS consideres all individual tax payers on accrual accounting unless you file documents indicating otherwise.
as cash basis, you can only count the sale as of the closing date, even if the contract for sale was established in the previous year. It is the date you closed on the sale.
NOTE: it is not possible to change your basis of accounting from cash to accrual after you have already filed taxes. IN order to change from a cash to accrual method you need to get the permission of the IRS. It can have very disasterous affects for your taxes, especially in the year of change. One you make the change, the IRS is likely not to allow you to make another change back. Individuals should never be on an accrual basis, because most current tax law for individuals is based on cash accounting.
to figure capital gains you need to use the fomrula:
capital gains = sale price- (orginal cost of property to you, + any closing costs from your original purchase which you were not able to deduct previoulsy, + improvements and major repairs) - cost of sellling.
How much did they pay for it?
What did you pay for it when you bought it? or how did you acquire it?