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Author: TMFTaxes Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121185  
Subject: Re: tax exclusion on home sale Date: 2/13/1998 2:39 PM
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[[Does this mean we can stop keeping track of our cost basis?]]

No...not officially.

Obviously, if you believe that you will NEVER go over the exclusion amount, and all of your gain would be excluded, keeping track of your additions to basis (in the form of improvements, etc) would be moot. All you would really need would be your purchase escrow and your sale escrow to prove that you did not exceed the exclusion amount.

But.....

What if you stay in the home for a long time and your gain EXCEEDS the exclusion amount? The only way that you'll get any tax relief is to take your original purchase price and increase that by the improvements that you make (and that you'll need records for if you want IRS to count 'em).

Or...more likely...what happens if the law changes? Or the exclusion amounts are dropped? Then what. If you can't prove your additions to your cost, you could get screwed BIG TIME.

Uncle Sammy would rather you not pay attention to that man standing begind the drapes. But for me...personally...I'm STILL going to track my additions to basis on my personal residence...just in case. It doesn't take that much time or paper.

TMF Taxes
Roy
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