House sale taxable, or only cap gain?

[Jay A]

When someone sells a house, must he declare the money as income for tax
purposes or is there only a capital gains tax on it?

[Helen P. OPlanick EA]

>When someone sells a house, must he declare the money as income for tax
>purposes or is there only a capital gains tax on it?
>

It depends. If you qualify for the exclusion, principal residence, owned and
occupied for 2 out of 5 years as such, you can exclude 250K per qualified
taxpayer. If not, and it is sold under a year, it is ordinary income. With
ownership over a year, capital gain.

Helen, EA in PA
Member of The Tax Gang
Director, National Assoication of Enrolled Agents
Immediate Past President, PA Society of Enrolled Agents

[Don Priebe]

> When someone sells a house, must he declare the money as income for
> tax purposes or is there only a capital gains tax on it?

Assuming it's your personal residence, only the capital gain is taxed. And
if you have owned and lived in it for at least two of the five past years,
the first $250K of gain is NOT taxed at all ($500K if MFJ). See Pub 523 for
all the details. http://www.irs.gov/pub/irs-pdf/p523.pdf
--
Don EA in Upstate NY

[Jay A]

Much appreciated...deal is, it's my mom's house. She is selling as my dad
recently died. They lived in it since 1979 and it's being sold for $315, so
I assume she will have to pay capital gain on everything over $250.

Thanks again.

[Archmedes]

"Jay A" <ca...@verizon.net> wrote in message
news:kplwc.7030$AU1...@nwrddc01.gnilink.net

No. She would receive a step-up in basis due to your dad's death.
Most likely, no tax. See a tax pro.

[Helen P. OPlanick EA]

I agree, with the step up in basis and the improvements needed since purchase,
there is probably no tax due.

[Arthur Kamlet]

In article <kplwc.7030$AU1...@nwrddc01.gnilink.net>,

technically you are correct, but what is the capital gain on which
tax is due?

Gain is the difference between net sales price and adjusted cost
basis.

So what is the adjusted cost basis?

Assuming they owned it jointly, when he died his half was
stepped up to fair market value when he died, and if in a community
property state, the entire house had its basis stepped up to FMV
at that time.

If not community property, then add your half of all capital
improvements to the cost. More than likely you will have no
taxable gain after exclusion.
--

__
Art Kamlet ArtKamlet @ AOL.com Columbus OH K2PZH

[Richard Macdonald]

"Jay A" <ca...@verizon.net> wrote in message

news:kplwc.7030$AU1...@nwrddc01.gnilink.net...

The gain would be $315K less basis (Original cost, improvements,
and closing/selling costs) so any excess over the $250K exclusion
amount should be small. Also if your father died this year your
mother should still be able to file MFJ as surviving spouse and
get the $500K exclusion.
--
Richard A Macdonald, CPA/EA
Dedicated student of Fr Luca Paccioli, Master Juggler.
Gib mir schokolade und niemand wird verletzt!!

[Jay A]

Thanks to all for the info. The house (which is a condo in NY) was purchased
in 1979 for $58,0000. She is selling for $315 and moving out here where she
will either rent or buy another condo. Can all the tax affairs be taken care
of once she is out here, or does it have to be cleared up in NY?

[Helen P. OPlanick EA]

IF there is a tax (and if you have been reading right along, most of us feel
there will not be), she can probably take care of it where ever, but be
careful. If she moves to a state that does not conform (allow the exclusion),
she may pay state tax on the gain if she sells the condo after she leaves NY.

[Jay A]

Guess I never specified where she is moving to....California.

What I meant by "can all the tax affairs be taken care of once she is out
here" was....can the filing be done here (even if there is no payment to be
made, I ASSUME she at least has to file a form?).

"Helen P. OPlanick EA" <helj...@aol.comnojunk> wrote in message
news:20040606075000...@mb-m14.aol.com...

[Don Priebe]

> What I meant by "can all the tax affairs be taken care of once she is
> out here" was....can the filing be done here (even if there is no
> payment to be made, I ASSUME she at least has to file a form?).

Nope, she may not have to even file a form. If the actual gain is less than
$250K after the commission and all other expenses of sale, neither the
federal or New York returns require a form. (Don't know about California.)

But if she does have to file, she files for the sale of the house as part of
her normal income tax return. She will file a normal federal return, plus a
part-year New York return and a part-year California return. All of these
returns will need the financial data for the whole year, so she will file at
the regular time (next January thru April). Most tax preparation services
can easily prepare out-of-state returns.

[Arthur L. Rubin]

Jay A wrote:
>
> Guess I never specified where she is moving to....California.

California conforms to THAT provision of Federal tax law.