Determining basis for house

[Roadrunner]

What is the name of your state? IN

In addition to my residence I own another house which I estimate on today’s market would be worth ~$150K.

Some history:
1967: parents build house for about $20K (I don’t remember exact amount)
1968: central air added
1969: mother dies
1970-71: father finishes basement doing the work himself, creating large family room, 2 BR’s & bath
1973: father remarries
1977: father transfers house to me & I assume remainder of his mortgage without refinancing
1980: I purchase and move to another house
1980-2003: (father dies in 1995 & stepmother’s sister moves in with her) I continue to pay taxes & insurance on my parent’s house while dad and/or stepmother live in it rent free; dad and/or stepmother purchase several improvements including new furnace & air, new roof, and new carpeting
2003: stepmother dies and stepsister moves in with her aunt; we agree they can both live there rent free as long as the aunt lives, if they pay taxes & insurance
2005: I have a new roof installed for $3500.

From 1980 until now I have paid out slightly over $40K in principal, interest, taxes, insurance, and more on a house in which I did not live and for which I received no benefit. I would like to recover that amount. I have offered to sell it to my stepsister for an amount which after paying capital gains would net me the ~$40K. That would be about $40-50K depending on how much basis we can come up with.

Could someone please tell me which of the following (ABCD) can and cannot be used for basis? (I am thinking they probably all can; but I am not at all certain about “C”.)

A: The selling price of the house in 1967.
B: Father’s improvements from 1967-1977.
C: Father and/or stepmother’s improvements from 1980-2003 while I owned the proerty. (During this time I neither lived in the house nor paid for the improvements.)
D: My $3500 roof purchase in 2005.

Thanks.What is the name of your state?

[LdiJ]

Originally Posted by Roadrunner

What is the name of your state? IN

In addition to my residence I own another house which I estimate on today’s market would be worth ~$150K.

Some history:
1967: parents build house for about $20K (I don’t remember exact amount)
1968: central air added
1969: mother dies
1970-71: father finishes basement doing the work himself, creating large family room, 2 BR’s & bath
1973: father remarries
1977: father transfers house to me & I assume remainder of his mortgage without refinancing
1980: I purchase and move to another house
1980-2003: (father dies in 1995 & stepmother’s sister moves in with her) I continue to pay taxes & insurance on my parent’s house while dad and/or stepmother live in it rent free; dad and/or stepmother purchase several improvements including new furnace & air, new roof, and new carpeting
2003: stepmother dies and stepsister moves in with her aunt; we agree they can both live there rent free as long as the aunt lives, if they pay taxes & insurance
2005: I have a new roof installed for $3500.

From 1980 until now I have paid out slightly over $40K in principal, interest, taxes, insurance, and more on a house in which I did not live and for which I received no benefit. I would like to recover that amount. I have offered to sell it to my stepsister for an amount which after paying capital gains would net me the ~$40K. That would be about $40-50K depending on how much basis we can come up with.

Could someone please tell me which of the following (ABCD) can and cannot be used for basis? (I am thinking they probably all can; but I am not at all certain about “C”.)

A: The selling price of the house in 1967.
B: Father’s improvements from 1967-1977.
C: Father and/or stepmother’s improvements from 1980-2003 while I owned the proerty. (During this time I neither lived in the house nor paid for the improvements.)
D: My $3500 roof purchase in 2005.

Thanks.What is the name of your state?

Point C is a tricky one that requires some research. This time of year I don't have time to do research unless I have a paying client. However, if we could assume that the improvements made by dad or stepmom (after the house was transferred to you) were gifts to you, then they could be included in your basis.

See a local tax professional.

[abezon]

Your basis includes:
--1/2 of original cost to buy land & build house, + 1/2 of cost of central air. (Dad's original basis)
--1/2 of the house's fair market value when mom died & dad inherited her half. (Dad's inherited basis)
--all of the improvements since then (gifts)
--Mortgage interest & property taxes IF you elected to capitalize them instead of deducting them each year on Schedule A.

If you sell for more than $12,000 below market value, you will have to file a gift tax return, but likely won't pay any gift taxes. Her basis will be whatever she pays you.