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Ask Mark Taylor Your Own Question
Mark Taylor
Mark Taylor, Certified Public Accountant
Category: Capital Gains and Losses
Satisfied Customers: 1668
Experience:  Certified Public Accountant
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What are the tax implications on a house in montgomery

Customer Question

what are the tax implications on a house in montgomery county md my mother ownes and wants to sell but is not her primary residence she is 90 years old. is she entitled to a one time federal tax exemption?
Submitted: 10 months ago.
Category: Capital Gains and Losses
Expert:  Mark Taylor replied 10 months ago.

Hi, my name is Mark. I will be happy to help you with your questions.

Expert:  Mark Taylor replied 10 months ago.

You mentioned that this property is not your Mother's primary residence. Was it her primary residence in the past 5 years?

Customer: replied 10 months ago.
no
Expert:  Mark Taylor replied 10 months ago.

Is this a rental property?

Customer: replied 10 months ago.
no we refurbished and want to sell
Expert:  Mark Taylor replied 10 months ago.

Ok, you would need to know what your Mother's cost basis in the property it. This would be the purchase price plus the cost of improvements.

Expert:  Mark Taylor replied 10 months ago.

The difference between the purchase price and the cost basis would be a capital gain.

Expert:  Mark Taylor replied 10 months ago.

Do you know approximately what the gain would be from the sale of this property?

Customer: replied 10 months ago.
purchase price was 0 cost of repairs is approx 150,000
Expert:  Mark Taylor replied 10 months ago.

Did she inherit this property?

Customer: replied 10 months ago.
house should sell for approx 620,000 minus 150,000 and 62,000 in sales comission approx 400,000.00
Expert:  Mark Taylor replied 10 months ago.

Does you mother have any other sources of income?

Customer: replied 10 months ago.
nothing but social security approx 1020.00 mo
Expert:  Mark Taylor replied 10 months ago.

Ok, how did your Mother acquire the property?

Customer: replied 10 months ago.
her sister gave it to her
Customer: replied 10 months ago.
she has since passed
Expert:  Mark Taylor replied 10 months ago.

Did she inherit the property from her sister? Or was the property a gift before she passed away?

Customer: replied 10 months ago.
gifted before she passed
Expert:  Mark Taylor replied 10 months ago.

If it was a gift, she would assume the same basis that her sister had in the property. This would reduce the gain a little.

Expert:  Mark Taylor replied 10 months ago.

I am going to assume that the $400,000 is accurate for the capital gain for now and do a quick projection.

Customer: replied 10 months ago.
what would she be liable for in taxes if capital gains is approx 400k
Customer: replied 10 months ago.
what is your quick projection?
Expert:  Mark Taylor replied 10 months ago.

Yes, she will be. At a gain of $400,000 here taxes would be around $66,000 for the federal. I am checking on the MD tax right now.

Customer: replied 10 months ago.
what percentage of federal is that and what percentage would state tax be?
Thanks
Customer: replied 10 months ago.
is it 20 percent federal and 7.5 percent state?
Expert:  Mark Taylor replied 10 months ago.

The capital gain at the federal level will be taxed at 15%.

Customer: replied 10 months ago.
what about state?
Expert:  Mark Taylor replied 10 months ago.

The state will be about $22,000. MD has a progressive rate. Anything above $250,000 will be taxed at 5.75%

Customer: replied 10 months ago.
thank you for your time
Expert:  Mark Taylor replied 10 months ago.

I hope you found this information to be beneficial. If this answered your question please take a few moments to rate my response. A rating is needed in order for me to receive credit for helping you today. The rating bar is located at the top of the page – ranging from 1 to 5 stars. If you need me to clarify aspect of my response or if there are additional areas of the question that you would like me to consider please let me know. I would be happy to continue the discussion. It has been my pleasure helping you today.

Expert:  Mark Taylor replied 10 months ago.

Please let me know if you have any other questions or need clarification. I am happy to help.

Expert:  Mark Taylor replied 10 months ago.

If you can find out what the sister's basis in the property that would help reduce the capital gain.

Expert:  Mark Taylor replied 10 months ago.

It was my pleasure. Please let me know if you need anything else.

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