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Need advice on a real estate question. Florida

Customer Question
Need advice on a...

Need advice on a real estate question

Accountant's Assistant: Because real estate law varies from place to place, can you tell me what state this is in?

Florida

Accountant's Assistant: Has any paperwork been filed?

No

Submitted: 6 months ago.Category: Tax
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Answered in 3 minutes by:
11/22/2017
Tax Professional: Barbara, Enrolled Agent replied 6 months ago
Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 6,146
Experience: 20+ years of experience in tax preparation; 30+ years of experience as a real estate/corporate paralegal.
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Welcome to Just Answer. My name is ***** ***** I will be happy to assist you.

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Tax Professional: Barbara, Enrolled Agent replied 6 months ago

What is your specific question, and is it tax or legal related?

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Customer reply replied 6 months ago
Tax related.We just sold a home in Maryland and wanted to know if we have to pay tax on any amounts received.We put out about 30K to sell this home and wanted to recoupe some of this money without having to pay Federal tax on this amount?
Tax Professional: Barbara, Enrolled Agent replied 6 months ago

I see you requested a phone call, but there appears to be an issue with it.

In the meantime, was the Maryland home your primary residence?

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Customer reply replied 6 months ago
It was a second home
Tax Professional: Barbara, Enrolled Agent replied 6 months ago

Then you would pay capital gains tax on the gain not the amount you received.

For example, if you purchased the home for $100,000 and had $30,000 of improvements, your basis would be $130,000.

If you sold it for $150,000 and had $10,000 of closing costs, the difference between $140,000 and $130,000 would be $10,000, and that is the amount you would pay capital gains tax on.

Make sense?

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Customer reply replied 6 months ago
We would receive around 100K,and I know that we have to reinvest the proceeds in like property.We just wanted to recoupe some of the 30K we put in to sell it.
Tax Professional: Barbara, Enrolled Agent replied 6 months ago

So you're talking about a 1031 exchange. In 1031 exchanges, the capital gains tax is deferred.

But as I mentioned, you do NOT pay capital gains tax on the amount you RECEIVE. You pay capital gains tax based on the information I previously provided.

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Customer reply replied 6 months ago
I am aware of this.We wanted to take say 25K and recoupe some of the money we spent and take the remaining 75K and buy down the mortgage on our primary residence.
Tax Professional: Barbara, Enrolled Agent replied 6 months ago

Then you're not doing a 1031 exchange.

You can do whatever you want with the money you received from the sale, but any gain will still be subject to capital gains tax.

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Customer reply replied 6 months ago
if we do what I suggested we would have to pay federal tax on the 25k?
Tax Professional: Barbara, Enrolled Agent replied 6 months ago

What is your actual gain on the sale?

This is NOT the amount you receive from the sale.

I previously provided an example.

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Tax Professional: Barbara, Enrolled Agent replied 6 months ago

If you provide the following information, I can estimate the CORRECT amount you will pay tax on:

What you paid when you bought the home in MD

Closing costs when you bought

Any improvements to the home (roof, etc.)

Amount you are selling the home for

Closing costs for the sale

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