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Old 01-21-2009, 11:08 PM
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capital gains basis calculation method

What things (items) can be used in calculating my basis on the sale of our 1993 cabin? What items (things) cannot be used in calculating my basis? This is our first experience in this arena. Giga thanks! Enod:



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Old 01-22-2009, 02:02 AM
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Well, there are a number of items that can contribute to increasing your basis when calculating the gain on the sale of your cabin that you purchased in 1993.

1. Any expenses from the original purchase escrow statement that you did not deduct on prior years tax return.

2. Any major improvement expenses incurred to date, that were not deducted on prior years tax returns as repairs.

3. Any repairs or improvements that were incurred prior to the sale of the cabin, known commonly as fixing up expenses.

4. Any commissions paid to a real estate agent for the sale of the cabin. Of course this is not part of the basis calculation but is reflected as a reduction of sales price.

5. Any amounts spent on fixtures that were permanently attached to your cabin.

6. Any amounts spent on painting, roof repairs and fixing windows of the cabin over the years. Usually a reasonable estimate would suffice usually.

Clearly, the above list is a sample of items and it is quite possible that you may have spent additional amounts that are deductible. I would urge you to consult your tax advisor to ensure that you have not missed out on allowable deduction.

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Old 01-23-2009, 12:15 AM
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1/22/09
Thank your for your generous help! Clarification:
Would you have answered differently if I had mentioned that we bought the Aspen-covered land at 8,500 ft elev and played contractor and laborers (and 'grunts') until it blossomed into an 8 bedroom, 6 bath log cabin?
~~ How would these data impact your response?
~~ Other than a 'tax advisior', will you share other sources of education on CG Basis
calculation methods?

Sincere thanks! Enod



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Old 01-23-2009, 10:48 AM
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The amount you pay contractors and laborers will be part of your cost basis. A good record of these expenses will be enable your CPA to reduce the profit on the sale of your cabin.

If you do the work, there is no cost incurred to you directly, and so there is no increase in your cost basis, whereas amounts paid to third party will add to your cost basis! Thus, the treatment will be different in the new scenario that you have presented to me, which clearly will lead to a lower capital gains tax liability.

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Old 01-23-2009, 09:54 PM
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You could also defer capital gains tax by taking an installment sale, where payments could be paid over say 3 years!



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