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emc011075, Master Tax Adviser
Category: Capital Gains and Losses
Satisfied Customers: 3002
Experience:  Master Tax Adviser and Enrolled Agent
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My sister brother and myself inherited a house from our

Customer Question

My sister brother and myself inherited a house from our mother. It was appraised at that time at 620,000.00. we used it as a rental for several years. A few years back we had it appraised $540,000 as my brother wanted to be bought out. We paid him 180,000.00. After a couple more years we sold it this last Jan. 2016 for 700,000. Am I figuring this correctly... ? 620 by 3=206 My sister and i together 412 +180=592 700-592=108 by 2=54,000. capital gains amount. and then of course deducting all from sale, depreciation and repairs etc...just say 50,000. end result What percentage would our taxes be computed at? 30? How much is capital gains in California?
Submitted: 11 months ago.
Category: Capital Gains and Losses
Expert:  emc011075 replied 11 months ago.

Hi. My name is ***** ***** I will be happy to help you.

Your calculation is correct but you will need to increase your gain by the depreciation you have been taken and reduce your gain by the selling expenses.


+ depreciation (look at your depreciation schedule or Schedule E)

- selling expenses /2

= capital gains to be reported.

Part of your capital gains will represent the depreciation, and the depreciation will be taxed as ordinary income, not as capital gains.

The capital gains will be added to your other income and taxed as followed:

in 10 - 15% tax bracket - no capital gains tax

in 25 - 35% tax bracket - 15% capital gains tax

in 39.6% tax bracket - 20% capital gains tax.

California doesn't have special capital gains tax so it will be taxed as ordinary income. Here are CA tax brackets:

make sure you look under correct filing status.

Expert:  emc011075 replied 11 months ago.

I see you read my respond. Do you have any questions? Is there anything else I can help you with today?

Expert:  emc011075 replied 11 months ago.

And if this answered your question, please take a moment to rate my response so that I may receive credit for assisting you today. You find the rating bar on the top of the page – 5 stars. However, if you need clarification, or want to discuss this issue further, let me know. Thank you.

Customer: replied 11 months ago.
I do have one more question in regards ***** ***** answer.....what all comes under "selling expenses"...not repairs done ? selling expenses such as new carpet, painting, etc. Does it have to be in the same year we sold it? We prepared to sell in 2015, we accepted the offer in Oct but it was extended until Jan of the next all we did in 2015 in preparation to sell should be ok right?
Expert:  emc011075 replied 11 months ago.

Selling expenses are marketing, RE agent commission and closing costs. The repairs are added to the basis of the property (620000) as improvements. Or if you did the improvements before you listed the property for sale, you can deduct it on your schedule E as regular maintenance. It is nothing usually that the landlord do some repairs and maintenance after tenants moved out and before new one move in.

Customer: replied 11 months ago.
hello are you there?
Expert:  emc011075 replied 11 months ago.


Expert:  emc011075 replied 11 months ago.

Do you see my earlier respond?

Customer: replied 11 months ago.
Hi sorry, my computer if the realtor told us to paint and put in new carpets in preparation for selling....that isn't taken off?thank you
Expert:  emc011075 replied 11 months ago.

Not as selling expenses. You will increase your basis by the improvements you have done. Your basis will reduce your sale price.

To calculate your basis, you will take the purchase price or the appraisal value in your case and add the improvements, including improvements you have done as part of preparation for the sale.

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