The Money Mustache Community

Learning, Sharing, and Teaching => Real Estate and Landlording => Topic started by: frugalnacho on January 01, 2018, 07:39:28 PM

Title: Substantiating home improvement costs for adjusting cost basis
Post by: frugalnacho on January 01, 2018, 07:39:28 PM

I sold a second home this year and I'm trying to calculate the adjusted cost basis.  A chain link fence and gate was installed, but I have no documentation or receipts.  The fence exists though and I can prove it was not there when I purchased the house, and was there when I sold it with before and after pictures. 

Am I able to make a cost adjustment even though I have no receipts/documentation?  Everything I've read says the tax code is on the honor system, but if the IRS decides to audit me I need to substantiate it with documentation.

What do I do?

Title: Re: Substantiating home improvement costs for adjusting cost basis
Post by: tralfamadorian on January 02, 2018, 08:03:10 AM

Are you sure you don't have or can find any documentation? Did you pay with a credit card? A check? Can you contact the contractor that installed the fence and ask for a copy of the invoice?

Title: Re: Substantiating home improvement costs for adjusting cost basis
Post by: frugalnacho on January 02, 2018, 08:56:38 PM

I for sure have no documentation.  The fence was gifted to me by family and installed by a family handy man paid cash.

Title: Re: Substantiating home improvement costs for adjusting cost basis
Post by: coopdog on January 03, 2018, 05:52:26 AM

This wasn't you primary residence?

Title: Re: Substantiating home improvement costs for adjusting cost basis
Post by: Another Reader on January 03, 2018, 06:15:05 AM

The giver of the gift would have documentation.  If you explain that you need it for taxes, they should provide it.

Title: Re: Substantiating home improvement costs for adjusting cost basis
Post by: frugalnacho on January 03, 2018, 07:52:24 AM

Quote from: Another Reader on January 03, 2018, 06:15:05 AM

The giver of the gift would have documentation.  If you explain that you need it for taxes, they should provide it.

No, I'm telling you there is no documentation. I already checked with them. It was a cash job done by a family handy man. There is no documentation that can be provided.  All I have is the finished fence/gate. 

It used to be my primary home more than 5 years ago, but has been a rental since then.

Title: Re: Substantiating home improvement costs for adjusting cost basis
Post by: Cpa Cat on January 03, 2018, 08:13:09 AM

A statement from the gift giver that they gave you a gift of the fence, on X date, and it cost X amount might be sufficient. It depends on how nice your hypothetical auditor is.

Having no documentation isn't the end of the world - as long as the lack of documentation is due to some reasonable cause. Obviously, "I paid some guy under the table" isn't a good reason.

But a gift is a decent reason. A statement from the giver might cover you, since you inherit their basis in the property.