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Lev, Tax Advisor
Category: Tax
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Experience:  Taxes, Immigration, Labor Relations
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MY 80 year old dad just sold a rental property. He bought the

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MY 80 year old dad just sold a rental property. He bought the property 23 years ago for $65,000 and sold for $300,000. He never lived in this home, was strictly rental. There was no mortage to pay back he owned it out-right.He is of course retired, his income is from social security & pension about $25,000 yearly.At closing they told him he must report the capital gain when he makes out his returns next year. He would like to know about how much of that $300,000 should he expect to pay in tax?
Submitted: 8 years ago.
Category: Tax
Expert:  Lev replied 8 years ago.

Selling the rental property is taxable event. As he owned the property more than a year - the gain will be taxed as long term gain at lower rates - not more than 15%.

The part of the gain that otherwise would be taxes at 15% or below will not be taxed in 2008 and 2009. The part that otherwise would be taxed at 25% or higher - will be taxed at 15%.


The taxable gain is calculated as (selling price) minus (adjusted basis), where the basis is mainly purchase price plus purchase expenses, plus any expenses to obtain the mortgage and refinance during the time he owned the property plus any improvement (not repair!) expenses, etc.


In additional - he would be required to recapture the depreciation depending on how long the property was rented - that amount will be taxed as your regular income.


Please be advised that additional taxable income will push your adjusted gross income up - and as a side effect - the social security income will be partly taxable - up to 85%.

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