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 Gilbert]

Generally the sales price IS the cost basis as that is what you actually paid for it.  There are some exceptions such as doing a 1031 exchange where some cost basis can get rolled into your new property but if you are talking about a single property, the purchase price is the basis.   You can split the value of the property vs. the land in the same percentages as the tax appraised so you have something to justify it.  Think about it this way, if you were selling a stock, you pay gains tax on what you sold for minus what you paid for it.  Not what someone else thinks it should have been worth when you bought it.  Tax assessor value is not really used for anything except estimating the property taxes.