The Formula
We do the Formula
Sales
Less Indexed Cost
There are a few variants on the formula we come to later. But first explaining the formula.
Sales- Is the price we get. We can reduce any sale expenses from Sale. Like brokerage paid.
Cost- Cost includes both cost to acquire and cost to improve. Lets say I bought a building in 2010 and did some construction on improvement on it in 2016. Both are considered cost.
We find out cost we spent for at. If it is gifted or inherited, cost means what it cost to the person from whom we got gift or inheritance. If it is purchased before 1.4.2001, we have a choice of getting it/taking its market value as on 1.4.2001 or cost whichever is higher.