Tax Law (Questions About Taxes)/capital gains

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Question
My deceased husband built our house over 3 years time, mostly from savings and out of pocket. We had a market analysis done when it was completed, but other than that I have no cost basis to use for tax purposes when I sell. Is there a way to determine how to handle this with taxes? Do I have to use $0 and end up paying a huge amount of capital gains? I can only guess as to how much it cost us to build.

Answer
Marie,

Thanks for your question.

First, your basis is NOT the value upon completion, but your cost - the cost of materials, etc.  You cannot include the value of your husband's labor in your cost basis.  The only thing I can tell you in this regard is to try and reconstruct the records and come up with a reasonable estimate.

However, you may not need to do that.  If you have lived in the house for at least 24 of the past 60 months as your primary residence and owned the house for 24 of the past 60 months, you can sell the house and exclude up to $250,000 of gain on the sale.  If the gain is under this amount, you do not even have to report it on your return.

Hope this helps.

John Stancil, CPA  

Tax Law (Questions About Taxes)

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John Stancil, CPA

Expertise

I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I am Professor Emeritus at Florida Southern College. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a CPA practice, specializing in tax, for over 35 years. I am a member of the National Association of Tax Professionals, The Florida Insititute of CPA's, The NCPE Fellowship. In addition I am a Certified Mentor for SCORE. Visit my website at www.mybaldcpa.com. I also offer seminars and consultations to churches and clergy on their tax issues at www.churchtaxsolutions.com Also visit my blog, www.thetaxdocspot.com. I am listed on Tax Connections at https://www.taxconnections.com/profile/John-Stancil/12258973 Prepare and file your own taxes at www.1040stancilcpa.com

Experience

I hold a doctorate in Accounting, and am a CPA. My certifications of CIA, CFM, and CMA are inactive. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I have operated a CPA firm for over 37 years and have taught accounting and tax at the college level for over 35 years.

Organizations
FICPA, NATP, NCPE Fellowship, Lakeland Business Leaders

Publications
The CPA Journal, Florida CPA Today, Green Consumer, Green Business, Global Sustainability as a Business Imperative, Palmetto Review, NATP TaxPro Quarterly, Mustang Journal of Finance and Accounting.

Education/Credentials
DBA University of Memphis MBA University of Georgia BS in Accounting Mars Hill University

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