Capital Gains and Losses

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Capital Gains and Losses
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I have a question in regards to term capital gains tax on…

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I have a question in regards ***** ***** term capital gains tax on real estate. Can anyone answer that kind of question here?
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11/19/2017
bkb1956
bkb1956, Enrolled Agent/Real Estate & Corporate Paralegal
Category: Capital Gains and Losses
Satisfied Customers: 4,825
Experience: 20+ years of experience as a tax preparer; 30+ years of experience as a real estate and corporate paralegal
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Welcome to Just Answer. My name is ***** ***** I will be happy to assist you.

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Please post your specific question.

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Customer reply replied 3 months ago
That would be great . Thank you. I'll type it now.

Take your time.

I'll be ready when you are.

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Customer reply replied 3 months ago
I'm in real estate and I have a client who wants to sell her rental property. It was left to her by her father about 10 years ago.
At the time she inherited it it was worth about $450,000. Now it's probably worth about $750,000. How would the capital gains tax be calculated now and how would it change if the current tax reform package was passed?
Customer reply replied 3 months ago
There's been about $85000 of accumulated dereliction taken and no substantial repairs done.

When you inherit real estate, the basis gets "stepped up" as of the date of death.

So her basis would be $450,000 plus any improvements.

She will pay tax on the actual GAIN--difference between sales price and basis.

She will also have depreciation recapture for any depreciation that was taken or could have been taken.

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She can reduce the sales price by any closing costs--real estate commissions, etc.

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Customer reply replied 3 months ago
sales price of $750,000 less approx closing costs of $45,000 would be $705,000 less the $450,000 plus the $89,000 in depreciation times the tax rate? Do you know the tax rate for federal and for California?
Customer reply replied 3 months ago
tax on $344,000 roughly?

Depreciation recapture is taxed at 25%.

Federal capital gains can be found at the following link:

https://www.fool.com/retirement/2016/12/16/capital-gains-tax-rate-for-2017.aspx

CA capital gains tax rate is 13.3%, the highest in the U.S.

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Customer reply replied 3 months ago
Do you know how the percentages would change if tax reform passes?
Customer reply replied 3 months ago
Does CA recapture depreciation also?

The capital gains tax under the proposed Trump tax reform would be:

The 0% tax rate on long-term capital gains and dividends would apply to taxpayers in the 10% bracket, which would include most folks who are in the 10% and 15% bracket under the current rules. The rate for long-term gains and dividends would be 15% for taxpayers in the 25% bracket and 20% for taxpayers in the top 35% bracket.

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Depreciation does come into play when calculating capital gains tax in CA.

bkb1956
bkb1956, Enrolled Agent/Real Estate & Corporate Paralegal
Category: Capital Gains and Losses
Satisfied Customers: 4,825
Experience: 20+ years of experience as a tax preparer; 30+ years of experience as a real estate and corporate paralegal
Verified
bkb1956 and 87 other Capital Gains and Losses Specialists are ready to help you
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Customer reply replied 3 months ago
Thanks very much!

My pleasure.

Thank you for the positive rating of my answer. It is very much appreciated.

Enjoy the rest of your weekend and have a wonderful Thanksgiving!

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I just received notification of your generous bonus. Thank you!

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Customer reply replied 3 months ago
If tax reform does start when would it actually be in effect?

Starting January 1, 2018.

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Customer reply replied 3 months ago
if she closes escrow 1/1/18 or later if the tax reform goes into effect she should benefit from it?

Yes, if it's approved as proposed now. It has passed the House, but not the Senate, and I understand the Senate is "tweaking" it.

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bkb1956
bkb1956, Enrolled Agent/Real Estate & Corporate Paralegal
Category: Capital Gains and Losses
Satisfied Customers: 4,825
4,825 Satisfied Customers
Experience: 20+ years of experience as a tax preparer; 30+ years of experience as a real estate and corporate paralegal

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