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Q. My mother has a piece of property that she bought about 30 years ago with a house on it. The house burned to the ground about 25 years ago. She has held onto the property ever since, paying the yearly taxes. Never renting out the property or making money it in any way. It is a vacant lot. She is now selling the property. Is there any way she can avoid paying capital gains on it?
>>>>>IR$Maven's Reply:
The sale of the property is a capital transaction. The fact that a house previously existed on the property is not relevant. What is important is how much was the total cost of the house and land (including legal fees & commissions), plus improvements to the house and contents of the house. The total cost must be reduced by any fire insurance proceeds. If the yearly real estate taxes were not deductible each year, they too probably can be added to the total cost computation. Lastly, deduct the total cost from the sales proceeds to complete the taxable capital gain.
Q. I
worked as an employee for three companies in the past eight years and
participated in their 401K plans. Lockheed, GE, and Alco(IKON). When I
left the companies, I moved the stock shares (not a cash rollover) to
a brokerage account. Shares went both to an IRA and a regular brokerage
account (based on whether they were purchased with the "company match"
portion or my own contribution). What is the best way to determine the
purchase price for these shares? (I need to calculate the capital gain/loss
when I sell them.) GE is providing me a "tax cost letter," but Alco said
I should value the shares at the time I moved them to Schwab - this doesn't
seem right. What do you suggest?
>>>>>IR$Maven's Reply:
Try to obtain a printout from Alco & Lockheed showing the shares you purchased, dividends and all related costs. The cost of the purchases plus the dividends you've picked up as taxable income equals total cost, per company. If you sell ALL the shares of one company, deduct total cost as outlined above from sales price to produce the capital gain. If only a partial sale, you may have a choice. You could use AVERAGE cost (total cost divided by total shares) to produce a per share cost (that is probably what GE did). I doubt if you'll have enough info to use a SPECIFIC identification method which is nice if you can identify the shares that cost the most, which will reduce your realized capital gain. Whichever method you choose, you must continue to use it until all of the companyÕs shares are sold.
Q. I
am being transferred by my employer. I have owned/lived in my current
residence for 8 months. Will I be liable for capital gains on profit from
the sale of my home? Will I be liable for deferred capital gains on profits
from previous homes? Is there anything I can do to continue my capital
gains deferral (e.g. buy another home)?
>>>>>>IR$Maven's reply:
1. Yes, you may be subject to tax on any capital gain on the sale.
2. If you are single, you can exempt up to $250,000 of gain ($500,000, if married) and have lived in the house for at least two years. For the 8 months you lived In your current residence, you can exempt 8/24 times $250,000 or $83,333.
3. Unfortunately, the deferral provisions, i.e. buying another home for at least the same amount as the sales proceeds on the old house is no longer available. So, you must now include the deferred capital gains on profits from previous homes.
*************************************
Q. My mother has a piece of property that she bought about 30 years ago with a house on it. The house burned to the ground about 25 years ago. She has held onto the property ever since, paying the yearly taxes. Never renting out the property or making money it in any way. It is a vacant lot. She is now selling the property. Is there any way she can avoid paying capital gains on it?
>>>>>IR$Maven's Reply:
The sale of the property is a capital transaction. The fact that a house previously existed on the property is not relevant. What is important is how much was the total cost of the house and land (including legal fees & commissions), plus improvements to the house and contents of the house. The total cost must be reduced by any fire insurance proceeds. If the yearly real estate taxes were not deductible each year, they too probably can be added to the total cost computation. Lastly, deduct the total cost from the sales proceeds to complete the taxable capital gain.
Q. I
am being transferred by my employer. I have owned/lived in my current
residence for 8 months. Will I be liable for capital gains on profit from
the sale of my home? Will I be liable for deferred capital gains on profits
from previous homes? Is there anything I can do to continue my capital
gains deferral (e.g. buy another home)?
>>>>>>IR$Maven's reply:
1. Yes, you may be subject to tax on any capital gain on the sale.
2. If you are single, you can exempt up to $250,000 of gain ($500,000, if married) and have lived in the house for at least two years. For the 8 months you lived In your current residence, you can exempt 8/24 times $250,000 or $83,333.
3. Unfortunately, the deferral provisions, i.e. buying another home for at least the same amount as the sales proceeds on the old house is no longer available. So, you must now include the deferred capital gains on profits from previous homes.
***********************************
Q. I am being transferred by my employer. I have owned/lived in my current residence for 8 months. Will I be liable for capital gains on profit from the sale of my home? Will I be liable for deferred capital gains on profits from previous homes? Is there anything I can do to continue my capital gains deferral (e.g. buy another home)?
>>>>>>IR$Maven's reply:
1. Yes, you may be subject to tax on any capital gain on the sale.
2. If you are single, you can exempt up to $250,000 of gain ($500,000, if married) and have lived in the house for at least two years. For the 8 months you lived In your current residence, you can exempt 8/24 times $250,000 or $83,333.
3. Unfortunately, the deferral provisions, i.e. buying another home for at least the same amount as the sales proceeds on the old house is no longer available. So, you must now include the deferred capital gains on profits from previous homes.
***********************************
