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Ask R. Greg Paszkiewicz Your Own Question
R. Greg Paszkiewicz
R. Greg Paszkiewicz, Enrolled Agent
Category: Tax
Satisfied Customers: 357
Experience:  9 years preparing tax returns - Marietta, GA
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capital gains tax

Customer Question

My company relocated my family to Minneapolis in August 2004. We bought a house for $429,000 and will sell it for $440,000. I am being relocated again in 60 days to Pittsburgh. Do I need to buy a house for more than $440,000 to avoid paying capital gaines tax? Since interest rates are up, I was thinking about buying a house around $400,000 How does a company relo help me?
Submitted: 11 years ago.
Category: Tax
Expert:  R. Greg Paszkiewicz replied 11 years ago.
The reinvestment option to defer gains no longer exists. However, since your move is due to a chnage in place of employment you are an exception to the 2 yr ownership and use rule. You can claim a reduced exclusion calculated as follows (# XXXXX days owned and used main home divided by 730 days times exclusion amount (500K assuming MFJ)).
Customer: replied 11 years ago.
Reply to R. Greg Paszkiewicz's Post: Help me calculate this and I will accept payment. (Glad to see you are from Marietta, I moved from Alpharetta to here in Minneapolis. I miss the BBQ!!)
I have approx 250 days in the house. If I buy a $400,000 house and make $0 profit on my current house, what would I end up paying in taxes?
Expert:  R. Greg Paszkiewicz replied 11 years ago.
They must have paid you a lot of money to get you to leave here for the frozen North. I don't guess they have Williamson Bros. BBQ in Minn? Anyway, assuming you are filing married joint you will be able to exclude up to 171K of gain (250/730 * 500K) so it sounds like you are fine. The only other question i had was whether you sold a home in 2004 when you moved to Minn and excluded a gain on that because that would require a further calculation. Let me know if this doesn't full answer your questions.


            Greg
Customer: replied 11 years ago.
Reply to R. Greg Paszkiewicz's Post: So you are telling me that we can buy a 400,000 home even though we are selling our home for 440,000?
We sold our home in GA..and excluded a gain of 50,000.
Expert:  R. Greg Paszkiewicz replied 11 years ago.
The amount you pay for the new house has no bearing on the tax question. You will qualify for a reduced exclusion of 500K multiplied by the following fraction: the lesser of the # XXXXX days you owned and used the MN home as a main home or the days between the sale of the GA home and the sale of the MN home divided by 730. To begin with you are saying you don't have a gain on the MN home anyway so i think this is all academic, but even you have have a small one it will be excluded.

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