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What are the capital gains taxes figured on, net or gross?

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C

CAlandlords

Member
What is the name of your state? OR

When someone sells an investment property (not primary residense and not 1031 exchange) are the capital gains taxes figured on the net proceeds?

Example: Property was purchased for $100,000. Several years later sells for $160,000 and credits the buyer $10,000. Are they taxed on $60k or $50k?

Thanks
 


C

CAlandlords

Member
I got the answer. I'll post it in case anyone else was wondering.

Giving the buyer a credit would be a cost of selling. You pay capital gains tax (if applicable) on the sale price minus all costs of selling.

Example:

$160,000 Sale Price
$9.600 Real Estate commissions
$5,000 credit to buyer
$1,000 in closing costs
_____________________
$144,400 Taxable amount
 
P

pojo2

Senior Member
Sorry you have not posted the info necessary to answer your question the way it was. What kind of property would need to be known to give the answer you received!

In addition your basis is not entered in the calculation, making it completely in error!
 
Last edited:
P

PghREA

Senior Member
CAlandlords said:
I got the answer. I'll post it in case anyone else was wondering.

Giving the buyer a credit would be a cost of selling. You pay capital gains tax (if applicable) on the sale price minus all costs of selling.

Example:

$160,000 Sale Price
$9.600 Real Estate commissions
$5,000 credit to buyer
$1,000 in closing costs (not all closing costs are deductable)
_____________________
$144,400 Taxable amount
Click to expand...

And you get to subtract the price you paid for the property orginally but, you also have to add in the amount of the depreciation you have taken over the years. You really need some help with this!
 
C

CAlandlords

Member
Thank you for your comments. I know my example is not completely accurate so I'm sorry if I may have misled anyone, but my original question was if the credit to the buyers deducted as a selling cost so as not to be taxed. I did find out the answer and was just trying to share with others who might be wondering. I should have been more clear.

This situation is not mine anyway. I was trying to inform someone else that the credit to the buyers would be deducted as a selling cost and I wanted to verify it before I told them for sure.
 
Last edited:
M

maryks

Member
You also get to deduct the cost of repairs, right? Save those receipts!!!

Situation:
150,000 purchase price
- 9000 closing costs on purchase
- 20000 upgrades and repairs (new furnace, new windows, electrical repairs and renovations)
- 15000 selling closing costs
+ depreciation
--------------
x 15% = capital gains

Correct?
 
P

pojo2

Senior Member
Wrong, those things would have been taken as deductions on the sch e that was filed each year. IF this was a rental property that is. The OP chose not to tell us what the property was.
 
C

CAlandlords

Member
pojo2 said:
Wrong, those things would have been taken as deductions on the sch e that was filed each year. IF this was a rental property that is. The OP chose not to tell us what the property was.
Click to expand...
I didn't purposely NOT tell what the property was. It is a residential rental and always has been and the sellers are not doing a 1031, so there is no chance of not paying taxes. All MY question was is if the credit to the buyer is deducted as a selling cost. It is. I was quite sure of that already but I had someone arguing with me that it was not so I wanted to double-check with the knowledgable and helpful people on this board.

As for Maryks' question, if the repairs were done as part of a negotiation between the buyer and seller can't they be deducted as a selling cost? Or at least deducted somehow? I do agree that if they were being done gradually while the home was being rented they would be deducted each year along with the depreciation, but I don't think that's what Maryks meant.

Again, this is not a situation I am in. I am just asking in general. And I will absolutely use a good accountant if/when this situation arises for me.
 
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