Is a tax appraisal acceptable for the cost basis on a house.?

Question

I'm helping my father with his taxes. He sold a rental house last year that he bought in 1963. He doesn't remember what he paid for it. We can't find the original purchase papers but we did find a county tax appraisal made only a few weeks after the purchase. Would the IRS accept that figure as a cost basis?

Answer 1

That tax appraisal is pretty much useless for setting the basis on the home. Most tax appraisals in that era had little correlation to the FMV of the property. The house that I grew up in in Boston was appraised for tax purposes at $9,500 but my Dad sold the place for over $55,000 in 1971.

Since he was using the property as a rental he should have been taking depreciation deductions against the rental income. You should dig through any old tax returns and see what he used as his basis for that depreciation. The depreciaton rules were different then but it's possible that a tax return from the early to mid 1980s would have the necessary depreciation information on it.

All of that said, if it was used as a rental for over 40 years, only the initial value of the land would remain as cost basis; the value of any improvements would have been fully depreciated long ago. That tax appraisal from '63 might be of some value there since most of them list the appraised value of the land and improvements separately. You might be able to make a case with the IRS for using the land value from that appraisal as your basis but since you must adjust the basis for any depreciation allowed OR ALLOWABLE you're not going to be able to use anything more as your net basis.

A couple last thoughts. Check with the registrar of deeds. Many jurisdictions assessed "stamp duty" on deed transfers back then and it was typically based upon the sales price. If there was a stamp duty, just add up the value of the stamps and you should be able to make a fairly accurate estimate of the sales price from that if you know what the duty rate was. Also, some newspapers publish real estate transfers and the price is sometimes included. Look through the archives at your local library. Maybe you'll get lucky there.

Answer 2

Income Tax at it's basic rate is 22% and it can increase to 40%, there also alot of other taxes, such as a tax to watch TV and silly stuff like that. living cost is extremeley high aswell, with basic food prices rocketing at the moment and the price of Petrol at about £1.10 a ltire, £5 a gallon, which is about $10/gallon housing is extremely expensive, as we are only a small island and land is expensive. the average house price, taken from across the UK is £220'000 so about $440'000 American Dollars. but houses are more expensive in the South and a bit Cheaper up North. the health care isnt bad, but there are massive waiting lists before you can even be seen to eb treated which is a major downfall with it. like others have said, you will find it extremely difficult to get visa's to work and to get permanent residancy unless you cna prove that you have a skill that no one else in this country has. The island, to put it honestly, is overcroweded, to many people, and just not enough rooms, not enough jobs, and not enough housing for evreryone, it's cramped, rainy, polluted and dull, but we Brits love it all the same

Answer 3

possibly, but since your father has owned the rental house that he bought in 1963, it has more than likely been fully depreciated and his cost basis is possibly $0, unless he set aside part of the cost for land.