Situation is: We are unmarried and selling the home we jointly own. We will each file sep federal income tax returns. I understand we are each entiteled to the 250k exclusion when figuring capital gains. But what about the gross proceeds from the sale? Do we each start our tax calculation equation with 100 percent of the proceeds (since we each own 100% of the house)...or do we begin by splitting the proceeds down the middle for tax calculating purposes?
State/Country relating to question: California
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Good morning. If you are each taking 1/2....report 1/2 of the total sale price less 1/2 of the total basis in the property.
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No you misunderstood. What I am asking is whether we SHOULD each declare 100 percent of sales price in order to calculate a possible capital gains tax. We are in a joint ownership/joint tenancy situation, and I am told that means technically we each own 100 percent of the home. So where do we each start on our separate individual tax returns in terms of calculating the capital gain--do we each have to report 100 percent of the proceeds and yet only get 250k exclusion instead fo 500K? Doesnt seem fair but this is the IRS!
Even though you have a joint tenancy situation, you do not each report 100% of the gain....otherwise you would be in the aggregate reporting twice the gain on the sale. You are each deemed to own an undivided 1/2 interest in the property for tax purposes so you each are entitled to 1/2 of the of proceeds from sale and 1/2 of the basis in the property. Then you each have a $250,000 exclusion.
29 yrs. as tax, real estate, and business attorney