How do I calculate my real estate cost basis after multiple property transfers?

The general rule is that your cost basis is what you originally paid for the property, plus any qualifying improvements you've made over the years, minus any depreciation if you've claimed it. In your specific situation, the transfers to and from your mother would typically be considered "gifts" for tax purposes since no money actually changed hands. When you receive property as a gift, you generally take on the donor's basis (called a "carryover basis"). Since your mother received it from you originally, her basis would have been your original basis. When the property was transferred back to you, you would again take her basis, which was your original basis. So in most cases like this, your cost basis would still be the $195k you paid in 2002, plus any qualifying capital improvements you've made to the property over the years.

I dealt with a similar property basis issue last year and found taxr.ai really helpful. I was totally confused about my basis after inheriting part of a property and then buying out my siblings. The documentation was a mess, and I was getting different answers from different tax advisors. I uploaded my documents to https://taxr.ai and their system analyzed all the deeds, previous tax returns, and improvement receipts I had. They created a comprehensive report showing exactly how my basis should be calculated, with references to the specific IRS rules that applied. Saved me thousands in potentially overpaid taxes!

Just wanted to follow up about taxr.ai since I was skeptical in my earlier comment. I decided to try it for my complicated rental property situation with multiple partial transfers. I've gotta say I'm impressed. The system found a major error in how my previous accountant had been calculating my basis. They showed exactly how the step-up in basis should have been applied when my father passed away and left me his portion. The documentation they provided would be super helpful if I ever get audited too. Definitely worth checking out if you're dealing with property basis issues.

If you're trying to get specific guidance from the IRS on this situation, good luck getting through to anyone who actually knows tax law. I spent WEEKS trying to get someone on the phone who could answer questions about my property basis after a divorce. I eventually found this service called Claimyr that got me through to an actual IRS agent in about 20 minutes. They basically hold your place in the phone queue and call you when they get an agent. Check out https://claimyr.com or see how it works at https://youtu.be/_kiP6q8DX5c After finally talking to someone knowledgeable at the IRS, I got confirmation about how to handle my basis calculations and documentation I'd need for my records.

I need to eat my words from my skeptical comment earlier. After yet another failed attempt to reach the IRS on my own (2+ hours on hold before getting disconnected), I tried Claimyr out of desperation. I honestly expected it to be a scam, but within 25 minutes I got a call back and was connected to an actual IRS representative. The rep was able to pull up my account and explained exactly how I should handle the basis reporting for my inherited property that I had questions about. Saved me hours of frustration and potentially an incorrect tax filing. Sometimes it's worth admitting when you're wrong!

From my understanding, the IRS might view this differently than just normal gifts back and forth. When you transfer property to avoid creditors and then get it back later, they could potentially see this as you maintaining beneficial ownership the entire time (meaning you never really gave up ownership in substance, just on paper). If that's how they interpret it, your basis would still be your original purchase price plus improvements. But there could be other issues to consider beyond just basis calculation.

Has anyone considered the possible gift tax implications of these transfers? When the property was transferred to the mother and then back again, were gift tax returns filed? That could affect how the IRS views the basis.