Basis in a Principal Residence Doesn’t Include Furniture

Gain on the sale of a principal residence is tax free up to $250,000 ($500,000 on a joint return) if certain conditions are met. The question put to a district court was whether the basis in the home for purposes of figuring gain includes furniture sold with the home. The homeowners wanted to increase basis (and minimize gain) by $144,150 for the cost of furniture sold with the home. The district court said no (R. John Forte, DC-UT, 6/21/21). Basis in a home includes capital improvements, such as an addition to the residence or a new roof. There is no authority to include furniture or other non-capital improvements (e.g., the cost of painting the home) to basis.