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Posted by Dick Adams on December 28, 2006, 12:07 am
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A friend of mine no less asked me a tax question today. He
is selling a some undeveloped land he purchased 30 years ago
at a $24,000 profit. He asked me what his capital gains tax
would be. I pretended I was an attorney and said "I'll get
back to you on that."
What is it and upon what does it depend?
Dick
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Posted by Herb Smith on December 28, 2006, 8:53 pm
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Dick Adams wrote:
> A friend of mine no less asked me a tax question today. He
> is selling a some undeveloped land he purchased 30 years ago
> at a $24,000 profit. He asked me what his capital gains tax
> would be. I pretended I was an attorney and said "I'll get
> back to you on that."
>
> What is it and upon what does it depend?
The capital gains tax is based on the amount of profit made
and the length of time that he held the capital asset.
Profit (or gain) is equal to adjusted selling price minus
adjusted purchase price. Generally, cost is what he paid for
the land 30 years ago, possibly increased by any capital
improvements made since then (fences, service roads, utility
services, etc).
Long term capital gain (more than one year holding) rates
are maxed at 15% of the gain.
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<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
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Posted by Phil Marti on December 28, 2006, 8:54 pm
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> A friend of mine no less asked me a tax question today. He
> is selling a some undeveloped land he purchased 30 years ago
> at a $24,000 profit. He asked me what his capital gains tax
> would be.
Somewhere between zero and $3,600, depending on what else is
on his return. It's 5% on the amount that takes him to the
top of the 15% bracket and 15% above that.
--
Phil Marti
Clarksburg, MD
<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
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<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
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Posted by Bill B on December 28, 2006, 8:54 pm
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> A friend of mine no less asked me a tax question today. He
> is selling a some undeveloped land he purchased 30 years ago
> at a $24,000 profit. He asked me what his capital gains tax
> would be. I pretended I was an attorney and said "I'll get
> back to you on that."
>
> What is it and upon what does it depend?
Dick,
You came to the right place! No attorneys here :)
15% quick answer unless in a bracket below 25%, in which
case it would be 5%.
Now to gum things up a little there are the usual questions
about loss carryforwards, installment sales and such.
There are also issues of AMT and phase-out of deductions and
exemptions, which could make the answer 22%. So if taxpayer
is real rich or real poor you can use the short answer, but
for most in the middle you really have to figure the tax
with and without.
Bill Brunell
<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>
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Posted by Bill on December 28, 2006, 8:54 pm
Please log in for more thread options rdadams@smart.net (Dick=A0Adams) posted:
> A friend of mine no less asked me a tax
> question today. He is selling a some
> undeveloped land he purchased 30 years ago
> at a $24,000 profit. He asked me what his
> capital gains tax would be. I pretended I was
> an attorney and said "I'll get back to you on
> that."
> What is it and upon what does it depend?
Is this a part of the 2006 tax law quiz?
Well, my answer is that the tax would be calculated as a
long-term capital gain, and the exact amount due would be
determined by entering the information on sale proceeds and
date thereof on the appropriate line of Schedule D, with the
cost basis and date of original purchase in the proper
columns. The resulting _gain_ (in this instance) of $24,000
would be included in the total capital income items for that
taxpayer, and taxes due would be calculated on the back of
the paper form, or by the software program on a computer.
That tax could be 5% (if total income is quite low), or 15%
for those with higher incomes. For a few unfortunates,
there might also be some confounded AMT (Alternative Minimum
Tax) considerations, which would be added to the effective
tax rate.
So you were right to say you would get back to them. And
now you can give them the normal tax preparer's answer:
"Well, it depends ..."
Bill ;-)
<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>
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