Step Up Basis

[Rapid Robert]

look at the gross sale price and the purchase price. Something had to be done....???

Of course I agree that the taxpayer should look for records of capital improvements. But I would not automatically agree that there must have been any significant amount of them, which seemed to be what you were saying "a house will not survive without some capital improvements". So my disagreement is not on the principle, but the degree to which it matters.

First, since there is no inflation adjustment for basis (a long involved tax discussion for another day), most expenditures over the life of the property will have been made in pre-inflationary dollars. For example, a remodel paid for with 1980 dollars, forty years ago, ain't gonna count for much against today's sales proceeds.

Second, when a house goes so long with a single owner (over fifty years in this case), there was never any pressure to implement modern upgrades for electric, plumbing, landscaping, and so on, like there would have been had the house been sold every decade or two. This house may still well have a mid-century galley-style kitchen with a couple of two-prong electrical outlets, and no central heat/AC. Not to mention internet access, energy-efficient windows, automatic garage door opener, and so on. For all we know, the house is a tear-down candidate and all the value is in the land. There is a house near me that just went on the market that is exactly like this: one third of an acre in a decent location, but the house itself is old and decrepit, as the listing more or less acknowledges.

Third, there has been a tremendous increase in suburban property values recently due to demand for better remote work locations (in my own case, according to Zillow my house has increased in value by over 25% in just the last year, compared to decreasing in value slightly in each of the previous two years). Again, consider that the land may be the largest part of the overall value.

[BOB W]

OK, Whatever! It is all land. Thanks