Quick Cost Basis Check- possibly bad advice

[Amber T.]

Hello BP Community,

I may have been given suspect advice by an accountant and would appreciate a quick check from the community.
In reading through IRS 551, my understanding is that the cost basis is the actual sale price of the property, with tax assessor % only used to break out the land & building allocation.
An accountant told me the opposite and filed my cost basis as the tax assessor value, over $100,000 below the sale price. They told me that sale price can never be used for cost basis, only a 3rd party appraisal would justify a cost basis higher than the tax assessor value. I cannot find anything to support this in 551 or online.

Can anyone help to confirm or refute this advice?

Thank you in advance!

[Christopher Tile]

Quote from @Amber T.:

Hello BP Community,

I may have been given suspect advice by an accountant and would appreciate a quick check from the community.
In reading through IRS 551, my understanding is that the cost basis is the actual sale price of the property, with tax assessor % only used to break out the land & building allocation.
An accountant told me the opposite and filed my cost basis as the tax assessor value, over $100,000 below the sale price. They told me that sale price can never be used for cost basis, only a 3rd party appraisal would justify a cost basis higher than the tax assessor value. I cannot find anything to support this in 551 or online.

Can anyone help to confirm or refute this advice?

Thank you in advance!

 Hi @Amber T. - Your current accountant is incorrect. You are correct. This is a very elementary concept that really any CPA/Tax accountant should understand. I would look elsewhere for a professional who is well experienced in real estate taxation, especially if you are looking to buy more properties in the future/have an existing portfolio. 

Regarding impact, a lowered cost basis will provide less depreciation throughout the hold, and more taxable gain when you sell. The IRS thinks your cost basis is lower than it actually is.