Capital Gains Tax On Parents 2nd Home?

[bigalcalbisque]

I am in California. My parents own an income producing property that they are thinking of selling. They own the property free and clear and have completely depreciated it. They originally bought it in 1968 for $14K. Their income is about $40K per year and is generated from rental income, social security payments and interest from savings accounts and CD's. They have told me with the deductions that they claim, that they pay no federal Income Tax. Fair Market value for the home is about $450k.
Based on this information can you tell me what their Capital Gains tax would be?
Also, I have heard that there will be no Capital Gains tax for "lower income people" that sell investment property beginning in 2008...is that true? Would they be considered "Low Income People?" Thank you for your advice in advance.
Sincerely, Al Burnham

[tranquility]

To do a calculation, you would need to find the depreciation taken before and after 1976.

Generally you will take the basis (basically cost plus improvements) and subtract that from the amount realized. Then you multiply by the appropriate long-term capital gains percentages (for Fed and CA if that is the situs of the property).

There is currently a 5% federal capital gains rate for low-income people who sell and *that* is what will drop to 0% in the future. However, that rate is only for a portion of the amount of capital gain and the calculation is difficult. I'm not sure a couple with 40k in income from the sources mentions would qualify.