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Posted by John H. Fisher on May 9, 2007, 4:13 pm
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> My sister has lived in her house for 3 years, BUT the first
> 2 years my husband and I legally owned the home. =A0She bought
> it one year ago and now wants to sell it. =A0She has no
> extraoridinary reasons for wanting to sell it other than she
> can make some money on it due to rapid appreciation in our
> area.
>
> The real estate told her she doesn't have to live in a home for 2
> years to get cap gain treatment on any profit she makes on her house.
>
> What is the story? THanks.
It will likely be worthwhile for your sister to remain in
the home for the full 2 year period. Having done that, she
could qualify for an exclusion of up to $250,000 in gains
($500,000 if married filing jointly) and, possibly, NO TAX
on the sale. Otherwise, the gain will be subject to Long
Term Capital Gain treatment (on the entire gain), if she
lived in the house for over one year (and less than two
years) and there was no compelling unexpected reason for the
sale..
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Posted by bono9763@yahoo.com on May 9, 2007, 4:13 pm
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> My sister has lived in her house for 3 years, BUT the first
> 2 years my husband and I legally owned the home. She bought
> it one year ago and now wants to sell it. She has no
> extraoridinary reasons for wanting to sell it other than she
> can make some money on it due to rapid appreciation in our
> area.
>
> The real estate told her she doesn't have to live in a home for 2
> years to get cap gain treatment on any profit she makes on her house.
>
> What is the story? THanks.
Because she did not own the home for at least two years, she
will have to pay tax on the gain. The real estate agent is
correct, the sale of the home will be reported on Schedule D
as a capital gain. If she owned the home for one year or
less (from date of closing to date of closing), it will be a
short-term capital gain and will be taxed as ordinary income
at the regular rates. If she owned the home longer than one
year, it will be a long-term capital gain and will receive
favorable tax treatment, i.e. the maximum rate is 15% of the
gain.
<< ======================================================= >>
<< 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 Stuart A. Bronstein on May 10, 2007, 11:54 pm
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>> My sister has lived in her house for 3 years, BUT the first
>> 2 years my husband and I legally owned the home. She bought
>> it one year ago and now wants to sell it. She has no
>> extraoridinary reasons for wanting to sell it other than she
>> can make some money on it due to rapid appreciation in our
>> area.
> Because she did not own the home for at least two years, she
> will have to pay tax on the gain.
I just had a thought. If she moves out but continues to own
it for a total of two years, would she qualify? She would
have owned it for two years, and lived in it for two years,
all within the prior five years though not the same two year
periods.
Section 121(a) says,
"Gross income shall not include gain from the sale or
exchange of property if, during the 5-year period ending on
the date of the sale or exchange, such property has been
owned and used by the taxpayer as the taxpayer's principal
residence for periods aggregating 2 years or more."
Stu
<< ======================================================= >>
<< 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 Bob Sandler on May 24, 2007, 11:28 pm
Please log in for more thread options >>> My sister has lived in her house for 3 years, BUT the first
>>> 2 years my husband and I legally owned the home. She bought
>>> it one year ago and now wants to sell it. She has no
>>> extraoridinary reasons for wanting to sell it other than she
>>> can make some money on it due to rapid appreciation in our
>>> area.
>I just had a thought. If she moves out but continues to own
>it for a total of two years, would she qualify? She would
>have owned it for two years, and lived in it for two years,
>all within the prior five years though not the same two year
>periods.
Yes, she would qualify for the exclusion. The two years of
ownership and the two years of occupancy do not have to be
concurrent. But this does not solve the sister's problem. She
isn't interested in selling because she wants to move. She's
interested in selling because she wants to take the profit now.
Since she has to wait a year to sell anyway, she might as well
stay in the house.
Bob Sandler
<< ------------------------------------------------------- >>
<< 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 Tom Russ on May 9, 2007, 4:13 pm
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> My sister has lived in her house for 3 years, BUT the first
> 2 years my husband and I legally owned the home. She bought
> it one year ago and now wants to sell it. She has no
> extraoridinary reasons for wanting to sell it other than she
> can make some money on it due to rapid appreciation in our
> area.
The general rule is that you must own and occupy the house
as your principal residence for 2 out of the preceding 5
years, in order to qualify for the tax exclusion on real
estate profits.
The 2 years of occupancy and the 2 years of ownership do not
need to be the same years, but you do need 2 of each. From
what you wrote, your sister satisifies only the occupancy
part, not the ownership part.
In that case, she could sell the house, but the resulting
capital gains would be subject to normal taxation as capital
gains. If she bought more than 365 days ago, they would be
long-term gains.
Now, she could always move out and rent the place for a year
in order to fulfill the 2-year ownership requirement before
selling, since she has already fulfilled the 2-year
occupancy, but that would delay the sale for about a year
and include the hassles of being a landlady.
Perhaps patience is the best counsel?
<< ======================================================= >>
<< 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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