1

I bought an apartment in Washington DC in 1995 to live in. Subsequently I moved out of DC (and a few years ago, out of the country) but kept the apt and rented it out for many years. I paid the mortgage off a few years ago. Eventually, I decided to not rent it out any further (my last tenant left in early 2020). I sold the apartment in summer 2021 and now I have to pay capital gains tax. For tax purposes, is the apartment:

  • my "main home" (doesn't seem to me as I live elsewhere);
  • a "rental/investment home" (I didn't really buy it with the intention of investment, and at least for the last year and a half, it was not rented at all);
  • or a "second home" (at least for the last 1 ½ years of it, it was a home that I kept for my own use)

To further add a wrinkle, given the passage of time and all my subsequent moves and life changes, I don't have any papers from the original purchase of the apartment. I remember the purchase price I paid for it but nothing else. What can I do to establish the cost basis for the apartment? (I have written to the bank that gave me the original mortgage in the hope that they may have a record but haven't heard back from them yet.)

Update: what are my options if I can't find any papers relating to the original settlement?

punkish
  • 271
  • 1
  • 8

1 Answers1

1

You're probably asking how to characterize it to your tax software. It is an investment property.

my "main home" (doesn't seem to me as I live elsewhere);

No. It is "mixed use", though.

a "rental/investment home" (I didn't really buy it with the intention of investment, and at least for the last year and a half, it was not rented at all);

Yes. There are some rules on mixed use properties with regards on how the cost basis is calculated for depreciation purposes which may be relevant to you.

or a "second home" (at least for the last 1 ½ years of it, it was a home that I kept for my own use)

No.

You can read more details in pub 523.

Specifically for cost basis, you can try the following:

  • County/City property tax records
  • Closing attorney/title company, if they still exist
  • Title insurance, if you still have any records
  • Mortgage origination paperwork, if it still exists (if you paid the mortgage off within the last 7 years, the bank should still have records)
  • Your own tax records - if you properly depreciated the property, you can reconstruct the original purchase price/cost basis from there.

Alternatively you can try to get it appraised with the effective date to the date of the original purchase and original putting in place as a rental (for depreciation recapture). Licensed appraisers routinely do retroactive appraisals.

littleadv
  • 190,863
  • 15
  • 314
  • 526