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Richard, Tax Attorney
Category: Tax
Satisfied Customers: 53683
Experience:  29 years of experience as a tax, real estate, and business attorney.
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If I bought a house for 500,000 and am selling it now for 800,000,

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If I bought a house for 500,000 and am selling it now for 800,000, but owe money to various creditors for 200,000, and want to pay off those creditors during the sale of the house (i.e escrow), is my capital gains calulated this way... 800,000 - 500,000 minus 200,000 totaling is a Capital Gains liability of 100,000? (of which I can use my 250,000 exemption?)?
Submitted: 5 years ago.
Category: Tax
Expert:  Richard replied 5 years ago.

Good morning. Your capital gain is $800,000 less $500,000. Your credit card debt is not relevant to the computation of gain because it is not part of your basis and it does not reduce your sale price. So, you have a capital gain of $300,000. You can use the $250,000 capital gain exclusion ($500,000 if you are married).



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Customer: replied 5 years ago.

The creditor I was referring to is not a credit card creditor, it is actually someone who has taken a 2nd trust deed out on the property, with the total amount being close to $200,000.


Would paying off that debt be deducted from the Capital Gains tax? If not, what would be deducted exactly?

Expert:  Richard replied 5 years ago.
Sorry for the delay...went to lunch.. No...unfortunately, what debt you have doesn't make any difference...the only thing that matters is what you paid for it, plus improvements, and what you sell it for.
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