Hi and welcome to Just Answer!Your basis - is your purchase price. If the property was transferred to you from your spouse as part of your divorce settlement - that doesn't affect your basis.If the property was purchased for $285k - that is your basis.
The basis should be adjusted by purchase expenses, improvement expenses, etc.For instance - if you replaced the roof - these are improvement expenses and are added to the basis.You will also deduct your sale expenses - for instance - Realtor fees.If you are single - you may only exclude $250,000 from taxable gain. The rest will be taxed as long term capital gain - reduced 15% tax rate will be used.
See example how to report the sale in IRS publication 523 - http://www.irs.gov/pub/irs-pdf/p523.pdf - starting from page 19.You may only claim $500K exclusion - if you are married and if you are filing a joint tax return with your spouse.If you do not file a joint tax return - you may only claim $250k exclusion.Let me know if you need any help.
I had a house previously that was sold for 700K in 1991 when we divorced; my share was 350K. I had extensive court costs preserving that $ and ended up with 80K that I put down on this current hse that I am preparing to sell. I understand about the costs I may deduct on this current hse, but the Adjusted basis--as a result of the earlier deferred gains in 1991-- is what I need to know in order to determine any present capital gains on the sale of my current hse.
There is no need to use the adjusted basis--as a result of the earlier deferred gains in 1991 - the tax law was changed in 1997 - and you will only use your purchase price.
You should not worry about the sale transaction back in 1991.