Message Font: Serif | Sans-Serif
 
UnThreaded | Threaded | Whole Thread (6) | Ignore Thread Prev Thread | Prev | Next | Next Thread
Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121585  
Subject: Re: Home Improvements: What costs can you capita Date: 11/13/2012 6:05 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 7
In the pickiest sense, what you include in your basis is determined at the time you sell, not at the time you expend money that is potentially includable in your basis.

So one course of action would be to retain your documentation for all of these expenses so that you have the records you need in case the expense can be included in the future.

However, basis issues is an area that hasn't changed very much over the years. So that might be a bit of overkill in terms of record keeping.

You may be looking through the wrong lens when thinking about what is included in your basis. The issue isn't really whether the expenditure increases the resale value. I prefer to look at it as including everything that you sell.

Arguably, everything you mention might be included in your basis. You bought the home knowing several things would need to be done to it before you put it into service as your residence. Had those been done by the seller, you would likely have paid a higher price for the house and those costs would have been directly included in your basis through the purchase price (as opposed to being separate from the purchase).

I'd include the current flooring costs unless you later replace that flooring with some other flooring. Painting is a bit iffy, as that's generally maintenance. But the lighting, vanity, and baseboards are all something I'd capitalize.

Even some deferred maintenance issues would be something I'd include in your basis. They were necessary expenditures to make the house usable as your residence. Specifically, I would be inclined to include the storm drain as part of your basis. Here, you were not the one to defer the maintenance. That was the prior owner. You simply took care of those deferred maintenance items as part of your overall plan to acquire the residence and prepare it for service. (On the back end of ownership, if you were the one to defer maintenance issues and then take care of them right before selling, I'd probably recommend a harder line on including them in your basis.)

As far as your own research goes, you could do worse than starting with Publication 551: http://www.irs.gov/publications/p551/ar02.html .

--Peter
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (6) | Ignore Thread Prev Thread | Prev | Next | Next Thread

Announcements

Disclaimer:
In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
Foolanthropy 2014!
By working with young, first-time moms, Nurse-Family Partnership is able to truly change lives – for generations to come.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Post of the Day:
Macro Economics

Looking at Currency Ratios
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement