EagleKeeper or CPA - need your help

[SunnyD]

I need a little Tax advice.

My father gave me a property he purchased a while back to hold toward a down payment for a home in the future. What I will need to do is sell the property and convert it to cash in order to put a down payment toward a home. I will not be building on this property, as it is nowhere near me.

What I need to know is what are the tax ramifications of doing this? Is there any sort of "shelter" in selling it and then taking the money and putting it toward a permanent residence? Also, if I sell it before the end of this year, do I have to file income on it if I do not purchase a home until next year?

We're strictly talking federal tax here. I really need to put things in a row so I know what I am supposed to do when the stars line up and I am able to buy a home.

 

[EagleKeeper]

Capital gain on the property based on the evaluation of when you received it and what you sell it as.

The only shelter would be if you can setup some typeof exchange of the property with another property that you would actually build on. Then the capital gains tax may be able to be avoided.

The home purchase is a seperate issue from the property issue with respect to taxes.

Also, you should have been able to deduct the property taxes on the property for every year you were responsible for them.

 

[Albis]

man you tax accountants are fast with your tax knowledge

it looks like you took that info out of a federal taxation cpa prep book 🙂

 

[spidey07]

Originally posted by: Albis
man you tax accountants are fast with your tax knowledge

it looks like you took that info out of a federal taxation cpa prep book 🙂

Well its not like they have to study, study and study and take a test or anything.
😉

 

[GuitarDaddy]

Yep, just like stocks/bonds or other investment vehicles you owe capital gains tax on the difference between the sales price and your original basis(value) in the property in the year that it is sold.

In theory you could build a wooden shack on the property and claim it as your principle residence, then when you sold it you would have 18mos(I think?) to roll the gain into your new residence without paying capital gains tax. I'm not sure what you would have to do to validate it as your principle residence, change of address?, file a homestead exemption?

 

[GuitarDaddy]

Originally posted by: spidey07

Originally posted by: Albis
man you tax accountants are fast with your tax knowledge

it looks like you took that info out of a federal taxation cpa prep book 🙂

Well its not like they have to study, study and study and take a test or anything.
😉

Yeah, us bean counters are almost as geeky as computer nerds. Fortunately I'm both (double geek🙂)

 

[EagleKeeper]

Originally posted by: Albis
man you tax accountants are fast with your tax knowledge

it looks like you took that info out of a federal taxation cpa prep book 🙂

Most of the information that I posted has previously been present/researched/discussed in the tax threads that are hosted each year.

Try to use the new search function on archived threads.

 

[SunnyD]

Originally posted by: EagleKeeper
Capital gain on the property based on the evaluation of when you received it and what you sell it as.

The only shelter would be if you can setup some typeof exchange of the property with another property that you would actually build on. Then the capital gains tax may be able to be avoided.

The home purchase is a seperate issue from the property issue with respect to taxes.

Also, you should have been able to deduct the property taxes on the property for every year you were responsible for them.

So if I sell the property and immediately turn the cash over into a new home which would be my residence, I will still have to pay tax on the profit from the sale on the original property? Or will there be an end-of-year deduction because of the rollover into a new property that would absorb the tax?

 

[AccruedExpenditure]

Since you didn't explicitly ask for my advice I refuse to give it to you for free =P.

 

[SunnyD]

Originally posted by: AccruedExpenditure
Since you didn't explicitly ask for my advice I refuse to give it to you for free =P.

lol - sorry, I apologize if I missed you in the yearly tax threads. I still love you. 🙂

 

[EagleKeeper]

Originally posted by: SunnyD

Originally posted by: EagleKeeper
Capital gain on the property based on the evaluation of when you received it and what you sell it as.

The only shelter would be if you can setup some typeof exchange of the property with another property that you would actually build on. Then the capital gains tax may be able to be avoided.

The home purchase is a seperate issue from the property issue with respect to taxes.

Also, you should have been able to deduct the property taxes on the property for every year you were responsible for them.

So if I sell the property and immediately turn the cash over into a new home which would be my residence, I will still have to pay tax on the profit from the sale on the original property? Or will there be an end-of-year deduction because of the rollover into a new property that would absorb the tax?

You have two seperate transactions.
1) Sale of the property. Captial gains will be possibly owed on it.

2) Purchase of the new property/residence.
There will be some deductions that this will generate due to financing and closing costs.

DO NOT TRY TO MERGE THE TWO. unless you can swap the new property (#2) in exchange for the old property (#1)

 

[SunnyD]

Originally posted by: EagleKeeper

Originally posted by: SunnyD

Originally posted by: EagleKeeper
Capital gain on the property based on the evaluation of when you received it and what you sell it as.

The only shelter would be if you can setup some typeof exchange of the property with another property that you would actually build on. Then the capital gains tax may be able to be avoided.

The home purchase is a seperate issue from the property issue with respect to taxes.

Also, you should have been able to deduct the property taxes on the property for every year you were responsible for them.

So if I sell the property and immediately turn the cash over into a new home which would be my residence, I will still have to pay tax on the profit from the sale on the original property? Or will there be an end-of-year deduction because of the rollover into a new property that would absorb the tax?

You have two seperate transactions.
1) Sale of the property. Captial gains will be possibly owed on it.

2) Purchase of the new property/residence.
There will be some deductions that this will generate due to financing and closing costs.

DO NOT TRY TO MERGE THE TWO. unless you can swap the new property (#2) in exchange for the old property (#1)

Ok... thanks. Black and white, that's what I was looking to hear.