Capital Gains Selling Home in FEMA disaster area

[FlyingRon]

"Selling price" and "What I paid for it" aren't the only factors in computing capital gains. I can almost bet that the sales expenses (real estate commission, etc).. probably will eat into a lot of that. Also, it's likely some of the money used for rebuilding could be considered a capital improvement and hence add to the basis.

 

[quincy]

"Selling price" and "What I paid for it" aren't the only factors in computing capital gains. I can almost bet that the sales expenses (real estate commission, etc).. probably will eat into a lot of that. Also, it's likely some of the money used for rebuilding could be considered a capital improvement and hence add to the basis.

I actually would be somewhat surprised if the final numbers don't show a loss rather than a gain.

 

[Taxing Matters]

I think the actual numbers need to be looked at by a professional in the Paradise area.

No need. Either he'll find someone to buy at the price he has in mind or he won't. From the sales he'll subtract his basis (which might not be the price he paid for it — the details of the work he had done and the insurance reimbursement matter as he may have adjustments to basis to make). The difference between the net sales price (gross sale price less expenses of sale) and the basis will be his gain. Whether he has any gain before applying any gain exclusion under § 121 is thus unknown, but he'll have all the info he needs to figure the gain once the sale is done; no need to have some professional look over his projections.

 

[quincy]

No need. Either he'll find someone to buy at the price he has in mind or he won't. From the sales he'll subtract his basis (which might not be the price he paid for it — the details of the work he had done and the insurance reimbursement matter as he may have adjustments to basis to make). The difference between the net sales price (gross sale price less expenses of sale) and the basis will be his gain. Whether he has any gain before applying any gain exclusion under § 121 is thus unknown, but he'll have all the info he needs to figure the gain once the sale is done; no need to have some professional look over his projections.

Matticus apparently came to this forum to learn about capital gains BEFORE he markets his home. Having a professional look over his figures can help him decide whether to sell now or later.

 

[Taxing Matters]

Matticus apparently came to this forum to learn about capital gains BEFORE he markets his home. Having a professional look over his figures can help him decide whether to sell now or later.

Certainly getting solid information on what price his home will realistically sell for in the current market for that area is worthwhile in deciding whether to sell it or whether to wait.

 

[quincy]

Certainly getting solid information on what price his home will realistically sell for in the current market for that area is worthwhile in deciding whether to sell it or whether to wait.

Agreed. If capital gains are a concern for Matticus, having a professional in the Paradise area personally look over the real numbers can help Matticus decide whether to hold onto the house longer before selling.

 

[LdiJ]

Matticus apparently came to this forum to learn about capital gains BEFORE he markets his home. Having a professional look over his figures can help him decide whether to sell now or later.

A real estate professional is a better choice in determining what a home might sell for in the current market.

 

[quincy]

A real estate professional is a better choice in determining what a home might sell for in the current market.

A Realtor for a market analysis. A tax professional to figure capital gains.

Again, I would be surprised if a gain is realized.

Even close to a year after the fire, very few of the 19,000+ structures lost in the Paradise fire have been cleared from the properties and/or replaced with new structures. Only one school (K-8) is open out of the nine that had been there. And there is no clean water in the area. Contaminated pipes still need to be replaced and it is estimated that this will take another two years.

 

[LdiJ]

A Realtor for a market analysis. A tax professional to figure capital gains.

Again, I would be surprised if a gain is realized.

Even close to a year after the fire, very few of the 19,000+ structures lost in the Paradise fire have been cleared from the properties and/or replaced with new structures. Only one school (K-8) is open out of the nine that had been there. And there is no clean water in the area. Contaminated pipes still need to be replaced and it is estimated that this will take another two years.

Based on that, I would be surprised too. Although I supposed that displaced people in the area (maybe staying with family) might snap up something that is all fixed up.

 

[quincy]

Based on that, I would be surprised too. Although I supposed that displaced people in the area (maybe staying with family) might snap up something that is all fixed up.

I know there is one couple who has bought from previous owners several of the burned-out lots to clean up the properties and build new housing. But many of the former residents may never return.

 

[Matticus]

Of course, as alluded to by a previous poster, is there really a capital gains issue to be involved here? Usually, property values go down after a disaster, not up.

In this instance 12k homes were burned down in the town which was about 90% of the homes. Values in the entire area increased significantly because the nearby town of Chico employs a majority of the people who lived in Paradise. There is still a major shortage of homes in the area. I was worried the home would be worthless but in this case the value increased.

 

[Matticus]

A Realtor for a market analysis. A tax professional to figure capital gains.

Again, I would be surprised if a gain is realized.

Even close to a year after the fire, very few of the 19,000+ structures lost in the Paradise fire have been cleared from the properties and/or replaced with new structures. Only one school (K-8) is open out of the nine that had been there. And there is no clean water in the area. Contaminated pipes still need to be replaced and it is estimated that this will take another two years.

I am fortunate that the water to my place is fine and have a letter from the county saying that water is potable. I am at the top end of town most of the water issues are at the lower end of town. Anyway, I been crunching numbers/talking with RE agent chances are I will have capital gains. I was trying to see if it even mattered if I held on to the house until December which would be 2 years of owning. But I technically didn't live there two years due to the displacement so I am not sure to 2 to 5 year rule would apply. Anyway looks like if I sell of the house now (house - commissions/improvements) my capital gains aren't that bad. Looking like 2-4 thousand which I am willing to pay If I have to just to git rid of it so I can move on with my life.

 

[Matticus]

Also, don't think the repairs to the house will be that much of a capital improvement. The house was renovated the year I bought it. The only thing that was improved by repairs was the roof. Everything else was just getting it back to where it was essentially.

 

[Matticus]

Also, thank you all for your responses. It really helps me in trying to end this mess.

 

[quincy]

If the numbers work out for you either way, then that is good news.

I know your area of California has experienced a housing shortage, even before the fires that displaced so many homeowners, so that is an advantage for you when selling. In addition, your community seems to be working hard to recover from the fire and have plans to prevent another like-disaster from happening again by strengthening building codes and widening (and adding) roads in and out of Paradise.

I can only imagine how traumatic the fire was for your city's residents. Good luck going forward.