Capital Gains on Property Sale

[mizperez]

What is the name of your state? california

my husband and i purchased and moved into a home in january 2000. we purchased and moved into another home in october 2001 and rented the first house out from october 2001 to december 2002. it is currently on the market and vacant. we are paying the mortgage on both homes. since we only lived in the first house for 21 months, but are currently paying the mortgage on it without the help of renters, do we or do we not have to pay capital gains taxes on the profit? we moved from the first house due to a bad neighbor (unforseen circumstance). the second question regarding this issue, if my husband were to move into the first house for 3 months while the house is on the market, would this qualify us to not have to pay the capital gains tax?

thank you.

 

[JETX]

Yes, if you have capital gains on the property, you will need to either pay taxes on it, or claim your once-in-lifetime exemption (not practical, considering).
And, if you reported the rental income last year, then you may also have to 'recapture' the depreciation that you may have claimed.

 

[BrokerRE]

You may be better served by posting this question on the tax forum.

You would be very well served by not paying attention to Halket since the once in a lifetime exclusion has been eliminated.

You now have the ability to exclude $500,000 in capital gains if you're married, and $250,000 in gains if you're single. However there are specific time limits involved, and it is these time limits you'll want to get clarification on.

I think if you post on the tax forum, you'll find the right person, or call a tax-preparer, preferrably an accountant tax-preparer.

Good Luck

 

[JETX]

And if you were really smart.... you would ignore BrokerRE, since he obviously doesn't know that you had to LIVE in the property for two of the past five years to qualify!! And that the exemptions do NOT qualify for a simple change of homes without a 'qualifying reason'.

"Married couples or co-owners who file taxes jointly may keep $500,000 in profits tax-free on the sale of a home they have owned and lived in for two of the past five years. Anything above that amount is taxed at 20 percent.

Single homeowners may keep $250,000 in profits tax-free on the sale of a home they have owned and lived in for two of the past five years. Anything above that amount is taxed at 20 percent."

Rental property owners may defer some capital gains tax if they purchase another rental property and qualify for a 1031 exchange, but not if they buy a personal residence.

Essentially, you are free to sell a residence every two years and pocket the profits.

If you own and occupy your house for less than two years before you sell, you can still qualify for a prorated exclusion from capital gains tax if you are selling because of a job transfer or health problems. The IRS and Congress are continually refining these rules, however. It is best to check with your tax adviser."

If you want the REAL facts (and not some bogus, 'broker spin'), take a look at:
http://www.startribune.com/stories/1664/1917471.html
http://www.irs.gov/pub/irs-pdf/p523.pdf
http://www.quicken.com/cms/viewers/article/taxes/25932/
http://www.south-county.org/REGuides/CapitalGains.html

 

[BrokerRE]

Yeah, you're right. You better just use your "Once in a lifetime exclusion" like Halket said.

Have a good time at your audit!

 

[HomeGuru]

Yeah, you're right. You better just use your "Once in a lifetime exclusion" like Halket said.

Have a good time at your audit!

**A: Halket did not state that.

 

[BrokerRE]

Am I reading these posts wrong?

I'm looking at the 2nd post on the thread. It's says Halket, and I'll cut and paste the first sentence here:

"Yes, if you have capital gains on the property, you will need to either pay taxes on it, or claim your once-in-lifetime exemption".

Your insight is greatly appreciated.

 

[JETX]

Let me do something that you obviously are above doing (and it isn't my first time!).

I was in error when I suggested the one-time exemption. As noted by BrokerRE, that tax provision has been changed.... and as noted in my 2nd post, these tax provisions change all the time.

But, it was a nice spin to divert your own error by repeating mine. So.... we are waiting.....

 

[BrokerRE]

I was in error. These particular people are not eligible for the exclusion. The home must be one of their principal residence for 2 of the 5 years. Not concurrent 2 years, so they can still make it happen.

However, in reading other threads, you have pointed out my errors, and deservedly so. However your name calling and attack on my career/life choice was uncalled for, and a disgrace.

I consider the entire episode closed and forgotten. I truly wish to help out, and will take the criticism in the spirit it is intended, as I'm sure I'll be wrong again, and probably soon.

Thanks

 

[JETX]

Just for the record... my critique of your posts started when you gave a smart-ass response:
"Nope, it's a secret..

Hire a Realtor

Ha Ha"

when asked a perfectly logical question by a poster.....

https://forum.freeadvice.com/showthread.php?threadid=124066&highlight=ask+and+realtor

That post made me suspect your professionalism and intent of assistance on this forum. And you have done very little since then to remove my concerns.....

 

[BrokerRE]

Well, you've got your dumb post that you can cut and paste.

And I've got mine.

you will need to either pay taxes on it, or claim your once-in-lifetime exemption.

Just for the record.

Now, we can either cut and paste these dumb posts every time you write something on this forum, or we can close the issue.

Your call.

I'm up for whatever you got.

 

[JETX]

 

[HomeGuru]

This is one of the reasons that I refer writers to post tax questions on the Tax Law board.
And to clarify, read Halkets word and BrokerRE's word after once in a lifetime.