It depends on what you mean by improvements.  If you are referring to an improvement to the real estate itself, you are right. 

But if you are referring to non-real estate items, such as appliances or carpet, it wouldn't really be a wash.

The sale price should be allocated based on the Fair Market Value of each item.  In most cases allocating the sale price would reduce the long-term capital gain on the house (taxed at lower rates) and result in a gain for the non-real-estate items (recapture at ordinary tax rates).

With that being said many tax preparers just ignore the non-real estate items and lump it all together with the real estate.  It isn't correct to do it that way, but it is common.