Sale of Home

[LBR]

I have a client who is going to put his home up for sale in a few months.
He bought the home over 10 years ago. He took out a construction loan and completely remodeled the home from the foundation up.
He has spent roughly $400,000.00 on the remodel and $225,000.00 on the original purchase. He has not had the home finalized by the county.
His realtor told him that he could sell the home for over 1 million dollars.
My question is: Should he get an appraisal at the time the property has been finalized by the county and use that as his basis or add up all of his receipts and use those amounts as his basis.
He is filing MFJ.
Thanks!

[buzzardbreath]

Basis is Cost

Assuming this is his personal residence, and absent any other circumstances, his basis is his original cost plus cost of improvements. County assessment for tax value, or other appraised value would be irrelevant.

Sounds like he may be in danger of exceeding his $500,000 exemption on gain of personal residence.

[Burke]

And if it is NOT his personal residence, or he does not meet the rules for exclusion, then he pays taxes on all the difference between costs and sale price. It still would be at capital gains rates, at least for federal taxation.