Last year we built a gorgeous in-law suite for my mom. She paid for it from part of the proceeds of her house - cost was around $190K (my dad has been gone 20 years). We just received a reassessment and the new mortgage went up about $500 (property tax + insurance). We are in pricey Fairfax County. In her old house, she was tax-exempt. I presume with the in-law suite this falls on us now? I wasn't sure if there are any rules or laws on in-law suites that have adjusted taxes if the inhabitant was tax exempt prior?
Was this discussed before the addition and any cost sharing considered? You might want to discuss this with a real estate attorney as, if I understand correctly, the proceeds of her house funded the addition, so she does have a financially vested interest in the house.
If the CPA says the money she gave you to build the suite is a gift, then she'll have some gifting tax to pay from the other part of her profit from selling her former house. That must be a sweet suit for $190K!
You may want to verify this with a CPA as tax laws are always changing.