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Ask Mark Taylor Your Own Question
Mark Taylor
Mark Taylor, Certified Public Accountant
Category: Capital Gains and Losses
Satisfied Customers: 1644
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: 8 months ago.
Category: Capital Gains and Losses
Expert:  Mark Taylor replied 8 months ago.

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

Expert:  Mark Taylor replied 8 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 8 months ago.
no
Expert:  Mark Taylor replied 8 months ago.

Is this a rental property?

Customer: replied 8 months ago.
no we refurbished and want to sell
Expert:  Mark Taylor replied 8 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 8 months ago.

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

Expert:  Mark Taylor replied 8 months ago.

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

Customer: replied 8 months ago.
purchase price was 0 cost of repairs is approx 150,000
Expert:  Mark Taylor replied 8 months ago.

Did she inherit this property?

Customer: replied 8 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 8 months ago.

Does you mother have any other sources of income?

Customer: replied 8 months ago.
nothing but social security approx 1020.00 mo
Expert:  Mark Taylor replied 8 months ago.

Ok, how did your Mother acquire the property?

Customer: replied 8 months ago.
her sister gave it to her
Customer: replied 8 months ago.
she has since passed
Expert:  Mark Taylor replied 8 months ago.

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

Customer: replied 8 months ago.
gifted before she passed
Expert:  Mark Taylor replied 8 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 8 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 8 months ago.
what would she be liable for in taxes if capital gains is approx 400k
Customer: replied 8 months ago.
what is your quick projection?
Expert:  Mark Taylor replied 8 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 8 months ago.
what percentage of federal is that and what percentage would state tax be?
Thanks
Customer: replied 8 months ago.
is it 20 percent federal and 7.5 percent state?
Expert:  Mark Taylor replied 8 months ago.

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

Customer: replied 8 months ago.
what about state?
Expert:  Mark Taylor replied 8 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 8 months ago.
thank you for your time
Expert:  Mark Taylor replied 8 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 8 months ago.

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

Expert:  Mark Taylor replied 8 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 8 months ago.

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