Items such as recording and transfer taxes, settlement and escrow costs, title insurance and legal fees, and real estate commissions are all legitimate items to be included in your computation of net gain. The best evidence of these expenses can be found in the settlement statement when you bought -- and then sold -- your house.

It is strongly recommend that anyone who buys a house keep a permanent record of all HUD- 1 settlement statements. When the last house is sold, and the applicable statute of limitations has expired, then -- and only then -- should you destroy those vital documents.

The question is also raised as to whether tax returns should be kept beyond the statute of limitations. Once again, I recommend they be kept forever. They do not take up a lot of room in storage, and periodically you may want to refer to them for reasons that go beyond an IRS audit. Often, a mortgage lender or other potential creditor may want to review your tax returns for the past few years.

If you do not have a copy of your tax return, you can obtain it by sending for IRS Form 4506, entitled "Request for Copy of Tax Form." You can also get additional detailed information from IRS Publication 552, entitled "Record keeping for Individuals." To obtain both documents, you can pick these up at your local IRS office, or download them from the Internet.

Thus, even in this era of wireless communication, paper documents must be preserved so long as the IRS has the legal right to audit your tax returns.

                                                                                                          back          home