How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Megan C Your Own Question
Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16576
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
23669918
Type Your Tax Question Here...
Megan C is online now
A new question is answered every 9 seconds

I purchased a parcel of land for $11,500, deeded it over to

This answer was rated:

I purchased a parcel of land for $11,500, deeded it over to my son some 7 years ago, and now it is in escrow for purchase price of $40,000. The agreement is $12,000 down, and my son will carry a note for 6 years at 4%. How much capital gains tax will there be and when does it need to be reported?

MyVirtualCPA :

Thanks for asking your question! I'm sorry to hear about your tax issue and I'm going to try my best to help you understand or resolve it.

MyVirtualCPA :

You will have capital gains on $28,500

MyVirtualCPA :

There will be no tax if you are in the 10-15% tax bracket. If you are above the 15% tax bracket you will pay 15% of this amount, and if you make over $400K per year you will pay 20% of the amount

MyVirtualCPA :

You will report this on schedule D of your tax return

Customer:

But he will not see any real gains, but only the $450 per month. Will he have to report this gain right away, and all at once?

Customer:

When you say no tax, do you mean no capital gains at all? He will clearly be in lower bracket.

MyVirtualCPA :

Yes, if you are in the 10-15% tax bracket, the long term capital gains rate is 0

MyVirtualCPA :

so there is no gain on the sale

MyVirtualCPA :

or no tax I mean

Customer:

what about the monthly note payment? is that taxed?

MyVirtualCPA :

The interest that he earns is not taxed

MyVirtualCPA :

I mean

MyVirtualCPA :

The interest that he earns is taxed

MyVirtualCPA :

I'm sorry

Customer:

but is it considered income?

MyVirtualCPA :

Yes, the interest is considered income.

Customer:

Ok, thank you

MyVirtualCPA :

you're welcome

MyVirtualCPA :

is there anything else that I can assist you with today?

Customer:

His main concern was how much capital gains and when to report

MyVirtualCPA :

Yes, he can report on his annual tax return

MyVirtualCPA :

Is there anything else I can assist you with tonight?

Customer:

But you said he would not have capital gains if in the 10-15% bracket, right?

MyVirtualCPA :

The capital gains tax rate at those brackets is 0%

Customer:

Thank you very much!

MyVirtualCPA :

you're welcome

MyVirtualCPA :

If you would, please rate my response as excellent so that I may receive credit for assisting you today

Megan C and other Tax Specialists are ready to help you
Thanks for allowing me the opportunity to help you. Please let me know if I can be of any further assistance to you in this matter. I really enjoyed working with you – please feel free to request me again when you come back to ask another question. Simply enter "MyVirtualCPA" in the subject of your question Thanks again for being a JustAnswer customer