Capital Gains Tax & $0 AGI in Ohio

[naesatt]

What is the name of your state? Ohio

I am receiving a piece of property from my sister for $0.00 using a quit claim deed. I receive a government pension (DIC) from my late husband, which is not taxable. I have no "taxable" income. If I sell this property for say $30,000.00 in the near (less than a year) future, how will I handle capital gains tax. More specifically what I want to know is do I have to pay capital gains tax & how much in Ohio? Thanks for any help.

[FlyingRon]

Since you received the property as a gift, you receive your sisters basis. Let's say she bought it for $10,000. If you sell it for $30,000 you owe capital gains on the $20,000. I assume you are not using this property as your principal residence nor are you using it as a rental or some other business property. I'm also assuming your sister never used it as a business or rental property either.

If sell the property within a year, you pay tax as if you had income of $20,000. If you sell it after a year, you get the federal long term gains rate of 15%. It looks like Ohio taxes things uniformly at 7.5% (I see they were thinking about a special capital gains rate, but it hasn't happened yet).

If all that is correct you'd owe $5,000 on your $20,000 gain.

[naesatt]

I forgot...we purchased the property in sept of 2005. We purchased the property for the amount of $20,000.00. I transfered the property to my sister exclusively in Sept of 2006 for zero dollars (gift). Now my sister is quit claiming it back to me exclusively for zero dollars. I would be selling this for $30,000.00. This is a small city parcel with a pole barn on it...no house...never been rented, it has been used by family to store misc items over the last 2 years.
Hope this helps....

[LdiJ]

Originally Posted by naesatt

I forgot...we purchased the property in sept of 2005. We purchased the property for the amount of $20,000.00. I transfered the property to my sister exclusively in Sept of 2006 for zero dollars (gift). Now my sister is quit claiming it back to me exclusively for zero dollars. I would be selling this for $30,000.00. This is a small city parcel with a pole barn on it...no house...never been rented, it has been used by family to store misc items over the last 2 years.
Hope this helps....

Then your capital gain is going to be 30,000 - 20,000 - selling costs. As you were told you will have 15% capital gains tax to pay on a federal level, and 7 1/2 % to pay on the state level.

Edit to correct: You may be eligible for the 5% federal capital gains tax rate, since you will have no other taxable income.

[abezon]

1. You get to use the long term capital gains tax rate immediately. When you are gifted property, you receive the property subject to the donor's basis, but you also get to use the donor's holding period. Since the property was originally purchased in 2005, it's long term already.

2. Based on the facts you provided, your adjusted gross income would be $10,000 - selling costs. Your taxable income would be AGI - $8,750 (standard deduction & exemption for single person under 65). [Max $1,250] The federal long term capital gains rate for someone with taxable income under +/-$29,000 is 5% if you sell in 2007 & 0% (free!) if you sell in 2008-2010. For you, this means either $63 or $0 of federal tax, so don't get too excited about the word free. Note that this if federal only; I don't know the Ohio laws or if the Ohio capital gains rate is pegged to the federal. Call the local HR Block & ask them what the long term capital gains rate is for someone who has AGI of $10,000, all capital gains. They'll also know the 2007 standard deduction & exemption amounts for Ohio & your city.

[naesatt]

Thanks for all the advice....I was hoping to not get raked over the coals on CG's on this thing. If I had to pay 35% CG's it would hardly make the whole thing worth while in the end. I guess being low income pays off in some ways huh**************.