In Jovita Diaz (T.C. Memo. 2012-241) the taxpayer sold two pieces of real property. The purchase prices were not in dispute. But in the first property she argued she made $60,000 in improvements after purchase. The costs included $40,000 for renovating the garage to be used as a daycare center and $20,000 for improving the driveway and walkway.

She testified that she hired a contractor to perform the improvements, but she did not introduce any records which supported the costs. She did not introduce an invoice from the contractor, a canceled check, a construction permit for the improvements, or before and after pictures.

Also, she did not introduce any records that showed the property was used as a daycare center. The taxpayer contended that she did not have documentation because she kept moving from one place to another. The Court found her testimony was unpersuasive in support of her claim of $60,000 of improvements. The taxpayer claimed $10,000 in improvements (installation of a lawn) with respect to the second property, but again, could show no support. The Court disallowed any increase in basis for the improvements. In addition, the Court allowed the imposition of the accuracy-related penalty for failure to keep records.

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