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My wife and i are selling a rental property in South Carolina, and live in Florida.. I do

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my wife and i are...
my wife and i are selling a rental property in South Carolina, and live in Florida.. I don't have exact numbers with me, but bought for 105k added about 5k in improvements, selling for 110k, but have about 7k worth of closing costs. As a rental property, I have been depreciating for about 12 years (or 36k), and have lots of carry forward losses (about 20k), because my income was too high to take losses. Now I'm being asked to sign an affidavit by the state of South Carolina regarding gain or loss of the property. Based on the above, do we have a gain or loss from the property in the eyes of South Carolina? If it's a gain, how do I calculate? With regard to federal, I assume i can take all my carry forward losses on this years tax return, since I'm selling the property?
Thanks,
Submitted: 2 years ago.Category: Tax
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7/29/2015
Tax Professional: Lev, Tax Advisor replied 2 years ago
Lev
Lev, Tax Advisor
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As a raw estimate - here we are Your original basis 105k (purchase price + purchase expenses)That basis is adjusted by improvements, depreciation and selling cost105k + 5k (improvements) - $36k (depreciation allowed or allowable) + 7k (selling expenses) = $81k (adjusted basis)Please be aware that not entire closing costs are considered as selling expenses - we need separately evaluate each item but for rough estimation we assume your determination is correct..Your expected gain 110k (selling price) - $81k (adjusted basis) = $29k - and it will be fully attributed to the depreciation recapture.As you dispose your entire rental activity - all previously disallowed losses are fully deductible and that result with $9k of rental income classified as depreciation recapture.For federal tax purposes - that amount would be taxed as long term capital gain.For SC - it will be taxed as regular income. When you prepare SC state income tax return - you start with your federal tax return - and as a nonresident - all your income and deductions are apportioned as from SC sources. Otherwise all rules are same as for federal tax purposes.
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Tax Professional: Lev, Tax Advisor replied 2 years ago
As a raw estimate - here we are
Your original basis 105k (purchase price + purchase expenses)
That basis is adjusted by improvements, depreciation and selling cost
105k + 5k (improvements) - $36k (depreciation allowed or allowable) + 7k (selling expenses) = $81k (adjusted basis)
Please be aware that not entire closing costs are considered as selling expenses - we need separately evaluate each item but for rough estimation we assume your determination is correct..
Your expected gain 110k (selling price) - $81k (adjusted basis) = $29k - and it will be fully attributed to the depreciation recapture.
As you dispose your entire rental activity - all previously disallowed losses are fully deductible and that result with $9k of rental income classified as depreciation recapture.
For federal tax purposes - that amount would be taxed as long term capital gain.
For SC - it will be taxed as regular income. When you prepare SC state income tax return - you start with your federal tax return - and as a nonresident - all your income and deductions are apportioned as from SC sources.
Otherwise all rules are same as for federal tax purposes.
Let me know if any correction needed.
Do you need any clarification this matter?
I am here to help with any tax related issues.
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