We purchased an investment property (vacant duplex) in June 2013. We made significant improvements to the property and sold it in December 2013. It was never offered for rent, so as I understand it, it's not a rental property for tax purposes.

I'm confused about how to calculate our cost basis. Most of the $$ spent on the renovation are capital improvements (new windows, new plumbing, upgraded electrical supply), which I understand go straight to our basis. However, how do we treat operating expenses such as mortgage interest, insurance, utilities, and maintenance and repairs? It doesn't seem right that these would go to increase our cost basis, but if not, how do we capture them as investment-related expenses?