I got divorced in 2009. My ex was going to buy my equity out and keep the house. I believe it says in the divorce papers he was awarded the house, although I'd have to double check to be sure. However, 5 months after the divorce, he realized he was not going to be able to get a loan. Since we had a balloon mortgage that was due and had no choice but to refinance, I bought out his equity. We originally paid $85,000 (and put $10,000 worth of improvements into the house), and I paid him $15,000 (an appraisal showed the value at $115,000 so $30,000 increase in value). I didn't want to live in the house so I have had it rented out since then. I am now looking at selling the property this year. What would I use as my basis? Is it the $85,000 ($95,000?) even though I had to pay him the $15,000 for his equity? Or do I get to add the $15,000 to that amount? This will make a big difference on figuring my capital gains! Thanks!