Riley and Joyce Pendergraph held title to their Gilroy, California, home in the NHuss Trust. The trust sold the home and claimed no taxable gain because of $286,070 in improvements to the home. During its audit, the IRS found only $56,284 in improvements to the home since its 1972 purchase. The court upped that amount to $82,039, creating $101,907 in taxable capital gains.

Since improvements add to basis and reduce taxable capital gains, keeping track of improvements is important. That’s ... Log in to view full article.