If you sold the property for $71,000 - and the basis is $51,000(purchase price) + $6,000(improvements) +?(depreciation for 2007)= $56,000.
Your capital gain is $71,000 - $56,000 = $15,000 - that will be long term capital gain - the tax rate will not be more than 15% and would depend on your other taxable income, filing status and deductions. Please provide for more précised estimation.
It is also depends if the buyer pay in full or you are providing financing.
Thank you for clarification - so your long term capital gain is expected to be $5000
Based on information above - your basis is $56,000 plus some purchase cost plus some selling cost minus depreciation for 2007 - you provides the cost of the property is $61,000 - where other $5000 comes from?
If you are filing married jointly - your taxable income will be $71,000 - $10900(standard deduction) - $7000(personal exemptions for two persons) = $53,100 - so you are in the 15% tax bracket (up to $65,100) - and long term capital gain will not be taxable for you.
However any depreciation for the time the property was in service should be recaptured and will be taxes at your regular tax rate - 15%
That is correct - long term capital gains will be $5000 - not long term capital gains tax
as long as you are in 15% tax bracket - your long term capital gain is not taxable. Long term - means you held the property more than before selling.
If you sell the property for less than a fair market value to the related party - your daughter - that would be a gift. If the fair market value of the property is $80,000 and you are selling it for $61,000 - that means you are selling $61,000/$80,000*100% = 76% of the property and gifting 24%.
Your capital gain should be calculated based on that part that you are selling.
For the gifted part - if the value is above $12,000 - you are required to file a gift tax return (there likely will not be any gift tax).
I did not say - there will be a gift tax - I said you might be required to file a gift tax return.
There will not be any gift tax unless your lifetime limit of $1,000,000 is reached.
But if the value of the gift is above $12,000 - you are required to file a gift tax return.
Assuming you sell the property for $61,000 - considering the FMV of $80,000 - that means you are selling $61,000/$80,000*100% = 76% of the property and gifting 24% - or $19,000.
Your basis attributable to part you are selling will be $56,000 (please verify if you need to add any other expenses)*76% = $42,560
Your capital gain on the part you are selling will be $61,000 - $42,560 = $18,440.
If you are filing married jointly - your taxable income will be $71,000 - $10900(standard deduction - assuming you are not itemize - please verify) - $7000(personal exemptions for two persons) = $53,100 - so you are in the 15% tax bracket (up to $65,100).
If you add long term capital gain - your total taxable gain will be $53,100 + $18,440 = $71540 - that will push you into 25% tax bracket - and your long term capital gain will be taxable:
As ther e will be a gift of $19,000 - you are required to file a gift tax return. There will not be any gift tax. You will use form 709 - http://www.irs.gov/pub/irs-pdf/f709.pdf
I glad that you are asking before you are selling - you may be better prepared. Please let me know if any clarification needed.