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I have trouble figuring basis cost for rental house

I have trouble figuring...

I have trouble figuring basis cost for rental house belonging to llc that was sold. it was purchased by taking over mortgage of someone who got it at a foreclosure price.

Accountant's Assistant: The Accountant will know how to help. Please tell me more, so we can help you best.

House bought by friend for $45000 for us to start our company, since we couldnt get a loan. so we did a quit claim and paid him cash Therefore, as i read the tax forms, that amount is the basis and then we add in improvements.We sold it for 99500.

Accountant's Assistant: Is there anything else the Accountant should be aware of?

I dont think so. there are improvements, im just adding them up. But i didnt realize tax was based on original cost vs new sale price, so im confused

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Answered in 1 minute by:
3/23/2018
Chad EA, CDFA®, CFP®
Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional
Category: Tax
Satisfied Customers: 2,608
Experience: IRS Licensed Enrolled Agent, CDFA ® CFP ®, MBA
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My name is***** will assist you today.

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---"house bought by friend for $45000 for us to start our company, since we couldnt get a loan. so we did a quit claim and paid him cash"---- You are correct the amount you paid for the quit claim deed is your cost basis, plus any improvements you made to the property over the years you have owned the property.

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Customer reply replied 3 months ago
thanks

Therefore, your cost basis is the purchase price form the quit claim deed transaction, plus your improvements.

Your capital gains will be determined by your cost basis - your net sales price.

Please let me know your follow up questions or if I have not answered your question clearly.

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Customer reply replied 3 months ago
one more thing. Just making sure i do all that math somewhere else and put the result on the form4797

Part III of Form 4797. Lines 20-24 helps you with the math plus adding back depreciation.

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Customer reply replied 3 months ago
thanks so much. We have only rented before, and that was much easier, tax form-wise!

Very true!!

Let me know if you do have any additional questions.

Chad EA, CDFA®, CFP®
Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional
Category: Tax
Satisfied Customers: 2,608
Experience: IRS Licensed Enrolled Agent, CDFA ® CFP ®, MBA
Verified
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