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R. Klein, EA
R. Klein, EA, Enrolled Agent
Category: Tax
Satisfied Customers: 3375
Experience:  Over 20 Years experience
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can you tell me what my capital gains are on a sale of a land

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can you tell me what my capital gains are on a sale of a land . The land price is 900,000 but after settlement charges moneys in my hand will be 815,000. The land was purchased over 4 years back for 550,000. 420,000 of that money was from a 1031 exchange , Balance was cash 130,000. The property that was 1031 exchanged was a strip center that was bough for 350,000. It was a rental property and sold after 10 years. Do not know how much tax benefit was received by depreciation, rest assured though depreciation was calculated. At the time of the 1031 exchange and the sale of the land, the owners did not have any source of income. The plaza fetched after expenses less than 70,000

Randalltax : Thanks for asking today.
Randalltax : Ton get an accurate idea of the gain, more info is needed about both properties, particularly the depreciation.
Randalltax : Depreciation reduces the basis. In order to compute depreciation, if you don't have that number, then the dates of all purchases and xchanges needs o be known, as well as the amount of each purchase attributed to land vs building.
Randalltax : Also, were these both commercial, or was one residential?
Customer:

Both were commercial. The strip center was bought in 1997 and sold in 2004 . The land was sold in 2009. There was no breakdown on the sale of the strip center regarding building and land. All was valued as one for 350,000 on purchase and 420,000 on sale . I dont have the depreciation numbers but while it was owed by the current party they did take advantage of depreciation. The property when it was purchased was 5 years old. The size of the property was approximately 8000 SQF. When the land was acquired , it was kept barren

Randalltax : I don't understand. The first property was bought in 1997. But I don't understand the 2004 and 2009 dates.
Randalltax : Did you exchange in 2004?
Randalltax : Is this last transaction 3 years ago and not recently?
Customer:

yes the exchange took place in 2004 and the last transaction took place in 2009

Customer:

Randalltax r u there

Randalltax : I can give you a rough estimate only because of lack of detail in the facts. I am also understanding that the second property was undeveloped land. I will use an 80% factor for building and 20% land on first one.
Customer:

Yes, i realize that you are working with inaccurate figures

Randalltax : The depreciation is estimated at 50k
Randalltax : Therefore original basis at 350k minus 50k, so new property basis at 300k plus 130k added or 430k total
Randalltax : 815 minus 430 equals 385k cap gain at 15% tax rate plus 50k recapture at 25% tax rate.
Customer:

Thanks , but if they dont have other source of income in both 2004 and 2007, dont you get an exmeption of 69,000 if tax is filed jointly . They are not US citizens and dont have any other sources of income in the united states

Customer:

also how did come to the 130 K figure

Customer:

Sorry i know where you are getting the 130 K figure

R. Klein, EA and 2 other Tax Specialists are ready to help you
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Customer: replied 4 years ago.


Thank you very much for your expert help, the one question that I have if the capital gains is the only income the couple have in both 2004 and more importantly in 2009, doesnt the tax kick in after a 69,000 ceiling, if taxes were filed jointly

The 130k was the boot added when the taxpayer bought the second property according to your question.

Your question did not mention anything about non resident aliens or about the total tax liability. My answer is based only on the capital gain portion and is not a calculation of an entire tax return. There is not nearly enough information to compute an entire return here.

I also do not know about any 69k exemption for aliens. Pub 519 has info on alien taxation. Page 19 indicates treatment of real estate sales. There is nothing in that publication about a 69k exemption. In addition, the entire gain may be taxed at 30% instead.
Customer: replied 4 years ago.

what is the capital gains if the property on sale is under a S corporation , is it passed on to individuals and subjected to standard capital gains

Yes. S corp income is a pure pass-through to individual shareholders.
Customer: replied 4 years ago.

what is the penalty on tax owed for the sum of 65,000. This was earned back in 2009 so havent filed in 2010 , 11 and 12

Customer: replied 4 years ago.


how much is the calculated penalty for non payment of 65 K from 2009 in both penalty and compound interest to date

If it is on a 1040 series, the penalty for late filing is 25% of the tax owed. The penalty for late pay is about 12% (1/2% per month since 4/15/10.

Interest runs about 4% annually on the tax plus penalty.