Tax

Have a Tax Question? Ask a Tax Expert

Ask an Expert,
Get an Answer ASAP!

Tax
This answer was rated:

Hi. I have a question about capital gains tax. We purchased ...

Hi. I have a question...
Hi. I have a question about capital gains tax. We purchased an investment property in April 2007 for $51,000.00. Financed amount was $45,900.00. Cash down was $7,634.00. Improvements to the property were $6,000.00. Taxable income is around $71,000.00. What dollar amount or percentage can we expect to be taxed should we sell the property (to the renter) by the end of 2008 (without reinvesting)? Thanks.
Show More
Show Less
Ask Your Own Tax Question
Answered in 9 minutes by:
6/2/2008
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,162
Experience: Taxes, Immigration, Labor Relations
Verified

If you sold the property for $71,000 - and the basis is $51,000(purchase price) + $6,000(improvements) +?(depreciation for 2007)= $56,000.

Your capital gain is $71,000 - $56,000 = $15,000 - that will be long term capital gain - the tax rate will not be more than 15% and would depend on your other taxable income, filing status and deductions. Please provide for more précised estimation.

It is also depends if the buyer pay in full or you are providing financing.

Ask Your Own Tax Question
Customer reply replied 9 years ago
Our intent is to sell the property for $61,000.00 to the renter (which is the cost of the house and what we put into it). Our adjusted gross income for 2008 is estimated to be $71,000.00. We will not be providing any financing.

Thank you for clarification - so your long term capital gain is expected to be $5000

Based on information above - your basis is $56,000 plus some purchase cost plus some selling cost minus depreciation for 2007 - you provides the cost of the property is $61,000 - where other $5000 comes from?

If you are filing married jointly - your taxable income will be $71,000 - $10900(standard deduction) - $7000(personal exemptions for two persons) = $53,100 - so you are in the 15% tax bracket (up to $65,100) - and long term capital gain will not be taxable for you.

However any depreciation for the time the property was in service should be recaptured and will be taxes at your regular tax rate - 15%

Ask Your Own Tax Question
Customer reply replied 9 years ago
I don't understand. In your first sentence you say our long term capital gains tax will be $5000 but then you say ... and long term capital gain will not be taxable for you.

In the long run, here's what we are trying to do.
Sell the house to our daughter (who's been renting it for the past year). We don't want to make any money on it but sell it to her for what we owe the bank (which is $60,000 and that includes our cash down payment, improvements, etc).

Based on our tax bracket (which I assume is around 15%)... will we or won't we have to pay long term capital gains tax when we file our 2008 tax return should she buy the house from us in 2008.

That is correct - long term capital gains will be $5000 - not long term capital gains tax

as long as you are in 15% tax bracket - your long term capital gain is not taxable. Long term - means you held the property more than before selling.

If you sell the property for less than a fair market value to the related party - your daughter - that would be a gift. If the fair market value of the property is $80,000 and you are selling it for $61,000 - that means you are selling $61,000/$80,000*100% = 76% of the property and gifting 24%.

Your capital gain should be calculated based on that part that you are selling.

For the gifted part - if the value is above $12,000 - you are required to file a gift tax return (there likely will not be any gift tax).

Ask Your Own Tax Question
Customer reply replied 9 years ago
Thanks... but why won't there be a gift tax?

I did not say - there will be a gift tax - I said you might be required to file a gift tax return.

There will not be any gift tax unless your lifetime limit of $1,000,000 is reached.

But if the value of the gift is above $12,000 - you are required to file a gift tax return.

Ask Your Own Tax Question
Customer reply replied 9 years ago
Thanks... and I know I'm driving you crazy... but my last question is (and to clarify)... My spouse and I (even though my spouse is not the biological father of my daughter) can sell the property for around $61,000 (which appraises at $80,000) and our long term capital gain is not taxable. We will, however, have to file a joint gift tax return because the value of the gift is around $19,000 but it will not be taxed because it's under the $24,000 rule. In essence, no one will be penalized or taxed come 2009?

Assuming you sell the property for $61,000 - considering the FMV of $80,000 - that means you are selling $61,000/$80,000*100% = 76% of the property and gifting 24% - or $19,000.

Your basis attributable to part you are selling will be $56,000 (please verify if you need to add any other expenses)*76% = $42,560

Your capital gain on the part you are selling will be $61,000 - $42,560 = $18,440.

If you are filing married jointly - your taxable income will be $71,000 - $10900(standard deduction - assuming you are not itemize - please verify) - $7000(personal exemptions for two persons) = $53,100 - so you are in the 15% tax bracket (up to $65,100).

If you add long term capital gain - your total taxable gain will be $53,100 + $18,440 = $71540 - that will push you into 25% tax bracket - and your long term capital gain will be taxable:

  • $65,100 - $53,100 = $12,000 will be taxed at 5% - $600
  • $18,440 - $12,000 = $6,440 will be taxed at 15% - $966
  • total long term capital gain taxes $1566

As ther e will be a gift of $19,000 - you are required to file a gift tax return. There will not be any gift tax. You will use form 709 - http://www.irs.gov/pub/irs-pdf/f709.pdf

I glad that you are asking before you are selling - you may be better prepared. Please let me know if any clarification needed.

Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,162
Experience: Taxes, Immigration, Labor Relations
Verified
Lev and 87 other Tax Specialists are ready to help you
Ask your own question now
Ask Lev Your Own Question
Lev
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,162
30,162 Satisfied Customers
Experience: Taxes, Immigration, Labor Relations

Lev is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,300 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,310 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

Robin D.

Robin D.

Senior Tax Advisor 4

13,695 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,651 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

R. Klein, EA

R. Klein, EA

Enrolled Agent

1,839 satisfied customers

Over 20 Years experience

< Previous | Next >

Related Tax Questions
What are the taxes rates 2016 for term gains in irrevocable
what are the taxes rates 2016 for long term gains in irrevocable trusts … read more
Chad CFP ®
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
736 satisfied customers
What is the taxable capital gain for each 50% owner
What is the taxable capital gain for each 50% owner (divorced couple) on a 1031 Exchange property where only one owner meets the 2 of 5 years occupancy test and one of the 50% owners is now remarried?… read more
Chad CFP ®
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
736 satisfied customers
Information on Gift tax return. My 100 year old mother wants
my 100 year old mother wants to gift the balance of a home loan to my brother, Balance is aprrox $35,000. What are the mechanics? … read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,490 satisfied customers
I file form NYC-3L and add to my tax the first estimated
I file form NYC-3L and add to my tax the first estimated payment for the following year, I'm trying to find this amount of my tax return where it was included in current year taxes due, the 1st estima… read more
Fred Rook
Fred Rook
Corporate Controller
BSBA
32 satisfied customers
Are you familiar with Capital Gain taxes on rental property?
Are you familiar with Capital Gain taxes on rental property? … read more
Lev
Lev
Tax Advisor
30,162 satisfied customers
I sold a rental property at a loss (no capital gains);
I sold a rental property at a loss (no capital gains); however should I pay the $133,000 on the principal of my house I owe 166,000 at 2.8% or buy another rental? … read more
Lev
Lev
Tax Advisor
30,162 satisfied customers
Tax question is there anyway to offset a capital gain of 60
Tax question is there anyway to offset a capital gain of 60 to 70k by buying another commercial property… read more
Lev
Lev
Tax Advisor
30,162 satisfied customers
We have $400,000 in capital gains for the sale of our
We have $400,000 in capital gains for the sale of our California home of … read more
Lev
Lev
Tax Advisor
30,162 satisfied customers
I need to know how to calculate capital gains tax on a
I need to know how to calculate capital gains tax on a rental property I am selling so I know how much i will have to pay on my 2017 tax return. Can you help? … read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
Estate capital gains tax rate for 61, single, unable to
estate capital gains tax rate for 61, single, unable to work, is claimed as a dependent form sister,only income collects $500 month stipend from gov., which pays for health insurance and meds. is gett… read more
emc011075
emc011075
Senior Tax Specialist
Bachelor's Degree
16 satisfied customers
Can house maintenance and property taxes be deducted on form
Hello. Can house maintenance and property taxes be deducted on form 1041 for a house owned by decedent prior to the Executors selling it? … read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
Second opinion] Has the tax rate in Peru on capital gains
Second opinion] Has the tax rate in Peru on capital gains for non residents recently been changed? I heard it is now 5% and no longer 30%.… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
Since my adjusted gross income is over $100,000, I can't
Since my adjusted gross income is over $100,000, I can't take the rental loss that I have even though I was actively maintaining the property. Since I have a mortgage and property taxes on that rental… read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,695 satisfied customers
Dependent Children. 1. Taxpayer's adjusted gross income is
Dependent Children.1. Taxpayer's adjusted gross income is over $ 800K so personal exemptions are phased out. 2. Taxpayer's children are between ages 12 - 17. 3. All three children have earned income o… read more
emc011075
emc011075
Senior Tax Specialist
Bachelor's Degree
16 satisfied customers
Shouldn't my standard deduction lower the amount of taxes I
Shouldn't my standard deduction lower the amount of taxes I owe? … read more
Lev
Lev
Tax Advisor
30,162 satisfied customers
What is the standard deduction for Married filing separate
What is the standard deduction for Married filing separate on the Iowa tax form 1040a line 37? … read more
Lev
Lev
Tax Advisor
30,162 satisfied customers
I've prepared gift tax returns for my mom's trust for three
I've prepared gift tax returns for my mom's trust for three years. I've shown 100% of all funds put into the trust in the year funded. All gifts have been in cash and are immediately available for dis… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
How do I have to amend a Gift Tax return? The original
How long do I have to amend a Gift Tax return? The original return did not indicate that the gift should be part of the lifetime gift tax exclusion. I want to correct that mistake. The gifts totaled a… read more
keeperumiami
keeperumiami
Sr Financial & Tax Consultant
Bachelor\u0027s Degree
1 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x