A builder buys a property, demolishes the house on it and then builds a new house which is sold. Can the original purchase expenses be included in the basis of the new house?
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The Basis of the demolished house goes into the land. So the land has high Basis.
The Basis of the new house is the cost of the new house, and the old house does not affect that.
Since I've received no answers maybe I need to clarify. The answer I am looking for is whether the entire purchase of the property can be used in the basis since the house on it was demolished or does it have to be prorated to only show the portion that would be the cost of the land.
The Basis of the demolished house goes into the land. So the land has high Basis.
The Basis of the new house is the cost of the new house, and the old house does not affect that.
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