how does the irs verify cost basis in real estate 
in real estate transactions the internal revenue service irs can verify the cost basis by looking at the closing statement of when the property was purchased or any other legal documents associated with the property such as tax statements the bottom linethe cost basis usually the purchase price of an asset is used to determine how much an investor will pay in capital gains the larger the difference between the cost basis and the sale price if the asset has appreciated the larger the tax bill will be monetarily if there are a lot of aspects to the cost basis such as fees or if the cost basis is adjusted due to dividends or stock splits or if distributions are reinvested then determining the capital gain can be complicated it can be helpful to use a tax advisor in these scenarios 