Hahn1040 Posted February 6, 2017 Report Posted February 6, 2017 Client sold a piece of land with a house and a store to the state of TN for a new road. she had been in negotiation with the state for almost three years for the price. During that time, she spent over $20,000 on the house to "Increase the market value, so they would pay more" They finally settled in 2016. They did not pay any more than first offered. so during that time, she put on a new roof, new carpeting, $7,000 carpentry... all for a house that will be torn down? She and her brother had inherited the property from Daddy in 1984. Of course, she has no records of value of any of it back then. (she is working on it) Brother gave her his half some years back when he was going through a divorce. So now she gets to pay tax on the entire gain (she is already in the 35% tax bracket before this) and then she will gift him his half of the proceeds. Family had lived in the house off an on over the years. No one was living in it at the time, so no real need to keep the house inhabitable... Yikes! Why didn't she just sell it to TN when they first asked instead of putting all of that money and time into it!!! Rant over.... 1 Quote
windmill Posted February 6, 2017 Report Posted February 6, 2017 Looks at the county tax rolls for the tax value in 1984. This establishes the basis when inherited. 1 Quote
JohnH Posted February 6, 2017 Report Posted February 6, 2017 Well, she got to dream about the anticipated big payday for 3 years. Not much different than spending $2,650/ year on lottery tickets, and roughly just as sensible. 4 Quote
Richcpaman Posted February 7, 2017 Report Posted February 7, 2017 If it was sold due to a road expansion, whatever, couldn't she rollover the money into a new property without tax? 2 Quote
ILLMAS Posted February 7, 2017 Report Posted February 7, 2017 Would it be a good idea to review publication 544? Quote
Hahn1040 Posted February 7, 2017 Author Report Posted February 7, 2017 Thank you yes, I have been researching that aspect of the gain. However, I still can't see the value of spending $20,000 to improve a house that is to be torn down. Quote
ILLMAS Posted February 7, 2017 Report Posted February 7, 2017 Have these folks been your client for a while? I have a suspicious someone advised them to make the improvements to reduce their loses, I would ask for prove of payments for the improvements, I once had someone tell me I bought a 20K kitchen for 6K but I would like to the 20K of improvements. Quote
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