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by CareyBot

(This is Part 2 of a five-part series. See Part 1, Part 3, Part 4 and Part 5.) The starting point for avoiding long-term capital gains tax on the profitable sale of your personal residence and investment real estate is its adjusted cost basis. This number is needed because it must be subtracted from the property seller's "adjusted sales price" to arrive at the long-term capital gain when the property is sold. Most property owners think their adjusted cost basis is their purchase price. As we will see, that is often wrong! 1. The basic "adjusted cost basis" rule. The starting point is usually (a) the property purchase price, plus (b) any purchase expenses that were not tax deductible at the time of purchase. Purchase Bob Bruss reports online. EXAMPLE: If you bought your personal reside...