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Bought a house as a summer home for 385,000 int 2002.

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Bought a house as...

Bought a house as a summer home for 385,000 int 2002. Subdivided the property shorthly after. In 2008 remortgaged to get better interest rate. Bank said they did not need one of the lots because the property was so valuable so I had a commercial lot free and clear. In 2009 wife got sick with cancer. She couldnt work to make pament. House forclosed on in 2009 ans wife died 2010. House sold at sheriff sale for more than I owed so I was free and clear of this debt. Sold lot in 2017. How do i determine basis for lot sale

Accountant's Assistant: The Accountant will know how to help. Is there anything else the Accountant should be aware of?

Not that I can think of.

Submitted: 4 months ago.Category: Tax
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3/6/2018
Tax Professional: Lev, Tax Advisor replied 4 months ago
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 33,126
Experience: Taxes, Immigration, Labor Relations
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When you purchase a summer home for 385,000 int 2002 - that purchase price should be allocated between that subdivided lot and the rest of the property.

While we may use any reasonable allocation method - following are general steps.

Take your tax record from 2002 - and verify percentage of allocation between the land and the building.

Use that percentage to allocate the purchase price to the land.

Then - allocate between subdivided lots based on acreage

That way you will come with the original basis of the lot you are selling.

.

Next - we need to verify if the title was in your name only or in both names you and your spouse?
If in both names - we need to know the fair market value at the time your wife passed away.

We also need to verify if you are in a community property state?

If yes - you are getting the stepped up basis for the full property value ,

but if that is not a community property state - only in half of the value

These are steps to determine your basis.

All improvements for the lot - if any - and selling expenses - to come to the adjusted basis.

Let me know if you need help with calculations.

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Tax Professional: Lev, Tax Advisor replied 4 months ago

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