How do I report costs of a recently sold second home?

This answer was provided by Mark Misselbeck, Levine Katz Nannis & Solomon PC, Needham.

Q: I have a second home in New Hampshire that I recently sold. The condo was originally sold to me with some furnishings and I bought additional items in the 4-year period that I owned the property. My question is what should be my cost (plus furniture or added appliances) and should I use my sell price minus the broker commissions and lawyer fees? --Peter, Charlestown

A: By all means, you should include the cost of anything that you bought to improve or furnish the property as part of the basis (cost) of the property.

You should include the costs of the sale (commission, legal fees, stamp tax and filing fees) as part of the cost. The gross sales price will be reported to the IRS and they will be looking for that amount on your return. If you did NOT rent the property while you owned it, simply report the sale on Sch. D - if you did rent it, you will need to report the sale on Form 4797. Remember, you may need to file a NH return, as well.