cost basis and capital gains on homes

From: "J. Phillip Jennings" <phillip.jennings@uc.edu>
Subject: cost basis and capital gains on homes
Date: Tue, 19 Jan 1999 23:52:08 -0500

Next Article (by Subject): Deduct IRA contributions if 1 spouse is covered by pension? juanb@VNET.IBM.COM
Previous Article (by Subject): Re: Cancelled checks, proof of payment David Martin
Articles sorted by: [Date] [Author] [Subject]

Help, I cannot figure out how to calculate the gain on a series of home
sales.  Here is my situation:

1991 - bought home (home #1) for $126,000
1995 - sold for $202,500 and bought a new home (#2) for $312,500.

I calculated the gain at the time to be approx. $54,000 after adding
improvements to the original basis and subtracting closing fees,
commission, and fixing-up expenses from the sales price of home #1.  This
gain was reported on my tax return, but deferred since I purchased a home
of greater value.  I am OK up to this point.  Now...

1998 - sold home #2 for $337,000.  I calculate the adjusted sales price
(-commission, etc.) to be $314,000.  My basis in this house was $316,000
(one major improvement in the 3 years I lived there).  I then bought a new
home for $249,900 (moved to a different state).  I calculate a $2000 loss
on home #2.

My problem is that i cannot figure out how to report the gain now that I
have home #3.  Since I lived in home #2 for at least 2 years, I am eligible
to avoid capital gains tax on the sale of the previous two homes, right?
My basis in home #3 is $251,000, but we just finished the basement which
would boost the basis to $273,000.  

Does any have any insight on how to keep track of my basis over the sale of
several homes?  I know I will not owe any taxes, but I need to keep a good
record and report the gain now since a bought a home of lesser value this
time.  What would my capital gain be now and how does the gain from home #1
paly into this.  I looked in several "money" books and only found vbague
directions.  TIA for your help.

Phillip Jennings
Cincinnati, OH

- -

Go to Jeff Salisbury LWGate Home Page.