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When reporting the value of home to income tax, it should be reported with the purchase...

When reporting the value of home to income tax, it should be reported with the purchase price or the fair market value?

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Question: When reporting the value of home to income tax, it should be reported with the purchase price or the fair market value?

Answer: As per income tax, home is a capital asset which would ordinarily be sell in the open market on the relevant date and as we know that the on such kind of capital asset capital gain is calculated and that too long term capital gain is calculated which cannot be calculated with the purchase of the asset i.e home in this question. So, when reporting the value of home to income tax, it should be reported with the fair market value of the home and not the purchase price of the home.

Also, given that the real etate is the heterogeneous market i.e does not remains same. In other words. in this prices of the properties vary alot, even within the same locality, it is difficult for an individual to determine the fair market value of the particular property of house, that too, which is for a date years ago.So, in that case according to income tax Act, 1961 Fair market value would be higher of the two i.e. the cost of acquisition of the property, or the price that the property shall ordinarily sell for if sold in the open market.However, there is no fixed formula to calculate fair market value of the property.

ekkarill92 answered 1 year ago
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