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Old 05-06-2015, 10:13 PM
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Short Sale - Capital Gains Question

Hello,

I am trying to calculate the capital gains on a potential short sale.

I have a rental property in Florida, and I live and work in Colorado. I owe $145,000.00 on the property, and it will most likely short sell for $95,000.00.

I have an annual income of $40,000.00 a year, plus $9,000.00 in rental income -- so roughly $49,000.00 a year.

I've tried to use a few online calculators, but they aren't tailored to calculate short sales. Any assistance would be greatly appreciated. Thanks.



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Old 05-07-2015, 01:08 PM
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Join Date: Oct 2010
Posts: 5,139
Basically, short sale qualification will depend on your type of loan ;Your lender ;your State law ;Type of property; Hardship reason. As with any short sale, you need to seek legal / tax advice before agreeing to the short sale. Because it is not your primary residence, you might be subject to taxation on the spread between your basis and the sales price. You might also be subject to a deficiency for the loan, which is the difference between how much you owed and the amount the bank received. It can be difficult to compute taxes on a rental property short sale because there are a lot more factors to consider. Aslongas the loan was used to but the pty, then, the cost basis of the pty is total price plus improvements to the property less accumulated depreciation. This is the adjusted cost basis of the pty. Aslongas the sales price is less than that the adjusted basis, you will generate an ordinary loss, sec 1231 loss I mean, on your 1040 line 14. Also, you must consider ord income when you receiver a 1099C;however your ordinary loss can negate all or a portion of the ordinary gain from debt cancellation. If you think you have more debt cancellation of debt than you do loss from the pty sale then you may consider insolvency; insolvency is another way of excluding gain on your return.
you will need to really work with an experienced and knowledgeable real estate agent who can negotiate on your behalf. In addition, please consult with a legal and tax professional who can you advise on how this will impact you.



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