Capital Gains on Sale of a Second Home
If a second home is sold, tax must be paid on any positive amount resulting from the sale price less the original base price.
If the home in question was purchased, for example, in 2001, and had major improvements made, it is my understanding that these improvements would add to the base price.
If the home in question then suffers a severe amount of damage (e.g., from flooding) that is covered by insurance, this, basically, makes the person insured "whole", so there is no change to the base price established when improvements were made. Is this a correct assumption?
If the insured then totally renovates the property, is the cost of the renovations added to the original base price of the home resulting in a new base price?