Tax consequences of selling one half interest in home, turning it into a rental for 26 plus years, then selling it in 2007. With proceeds bought a larger home to live in 26+ years ago
State/Country relating to question: California
Hello and thanks you for using Just Answer. When did you stop living in the home? How much did you sell the one half interest in the home 26 year ago? How much did you sell the home for in 2007?
Sold house to ourselves and other couple on August 24, 1979 for 75,000. Title changed to our names as to undivided 1/2 interest other couple same with "all as joint tenants" at the end of the acknowledgement on the grant deed. Sold house completely in July 2007 for 570,000 of which we netted432,966.15 to be divided in half. I have been s widow since 1999, I had to take a loan out on my half, March 2006, at which title was changed to read on my half, "a widow" my half had been in our family trust till then. My loan for $80,000 was paid out of my half. We have been "straight line" depreciating house and improvements on 25 year plan. We Deducted this againt rental income, each couple one half on tax returns. I think this is all you need? My gross income in 2007 was gross salary: $16,743.59, Pension: gross $12,679.32, Ordinary dividends: $1,543.37. I had heavy medical bills so this will be a very low net. Thank you, XXXXX XXXXX me know if you need anything else.my incom
Do you know the total deprecation taken from 1979 to 2007? Was the $80,000 loan used for improvements on the rental property?
Depreciation totals: house land not included - $29,250.00, loan fee - $422, 25 years new carpet- 1,297.00 - 3yearsShake roof replaced with tile - $1,224.00. 27 1/2years$80,000 loan spent - medical bills, repairing house I live in, helping my sons save their houses, fee for flight certain For son's pilot training and a car for me, I was a public speaker for a fashion venue, always on road. None spent on rental
If you received $216,483 from the sale of the rental home and paid a $422 loan fee, your net proceed from the sale should have been $216,061? Subtract the amounts you paid for new carpet ($1,297), Shake roof ($1,224),and your half of the purchased price ($35,000), your gain from the sale is $178,540 which is tax at the long-term capital gain rate of 15%. The long-term capital gain tax on $178,540 is $26,781. You must also pay a tax in the amount of $7,313 ($29,250 x .25%) on the depreciation you deducted in prior years on the rental home. The depreciation deducted must be recapture. Depreciation recapture refers to the amount of gain from the disposition of rental property that must be reported as Section 1250 gain (25%).
Should I also do the regular profit or loss for that years rent and expenses? And last question: is the 25% based on the capital gain? My income that year was small. Would I qualify for the 5%?
You should file Tax Year 2007 Form 1040 and Schedule E reporting income and expenses. If your ordinary tax rate for 2007 was 10% your unrecaptured Section 1250 gain will be tax at 10%. The minimum tax rate for unrecaptured Section 1250 gain for 2007 is 10% and the maximum tax rate for the gain is 25%.
10 years self employed , Income Tax Preparation & Representation