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Dave CPA
Dave CPA, Accountant
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If I sell my rental property for $65,000, will I be able to

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If I sell my rental property for $65,000, will I be able to declare the capital loss of $165,00 (original purchase price $230,000) to offset my capital gain of $100,000 from the sale of my 401K company stock?

Hello,

 

Welcome to Just Answer,

 

You can't sell 401K stock. You take a distribution. 401K accounts do not pay capital gains tax. The IRS eliminates the payment of capital gains inside of your 401k because the plan meets the requirements of the IRS to qualify as a qualified retirement account.

 

401K distribution would be ordinary income.

 

The loss on the sale of your investment property would recieve 1231 treatment in regards XXXXX XXXXX loss.

 

I hope this helps.

Dave CPA and other Tax Specialists are ready to help you
Customer: replied 5 years ago.

I need some clarification, please. If I closed my 401K of $500K and withdrew $250K via the sale of my company stock, would the 15% tax on the stock appreciation (in this case-$100K) be offset by the loss on the sale of my rental property? I am aware that the $150K would be subject to the ordinary income tax rate. Or are you saying that a captial gain on stock sales cannot be offset by a loss on the sale of investment property?

Hello,

You can offset capital gains realized by the sale of stock from the loss on the sale of your investment property. If your original question you mentioned the "sale of 401K company stock". There is no such thing.

If in fact you did realize a stock gain that was not part of a defined retirement plan like a 401K than you can offset the two capital investments. But regardless, the loss on the sale of 1231 property (I assume that this was held longer than on year) can be fully deductible as an ordinary loss and can offset any other income ordinary or capital. Here is a nice link that is easy to follow.

http://loopholelewy.com/loopholelewy/15-selling-your-business/selling-your-business-12-sec1231.htm

Let me know if you have any other questions.