Hello, I would like to ask a question of any the tax expert opinion to confirm my own rental property tax conclusion before paying the $250 - $500 to a CPA for tax consultation for the same result.

Purchased a primary resident home $343,000(mortgage note of $300,000) in April 2007 in Florida and the cost basis at the time was $320,000 for the structure, land was $40,000. Downhill from there, of course.

Unable to sell so converted to rental home in January 2012 because of a relocation for work. The tax basis on 1/1/2012 was $185,000 for the structure, land was $30,000.

Here is my calculation if we sell the home for $280,000 in May 2016, I mean if.

Deprecation 27.5 year
Tax basis is 185,000 the day converted to rental
185,000/27.5/12 = 560.60 a month(or less)
560.60*53 months of renting out = $29,712.12

My new tax basis as May 2016 will be 185,000 – 29,712.12= $155,287.9

My IRS “so call capital gains” will be

$280,000 - $16,800(6% realtor commission) = $263,200
$263,200-$16,909 or less(carry over for loss deductions 4 years)= $246,291 or
$246,291 - $155,287.9 = $91,003.1
The capital gains is $91,003.1 regardless the so call “gains” belongs to the bank (owe $300,000)

We will have to 1st pay $16,800 (commission) out of pocket, 2nd pay $20,000 + some fees to close the note to the bank(because the note was $300,000), 3rd pay let’s say 15% capital gains tax on $91,003.1 * 0.15 or more = $13,650.47, finally, we pay extra $600 a month toward this rental home for mortgage, HOA, etc. because the rent is less than actual cost of monthly mortgage per month. $600 * 53 = $31,800

The worse of all, we are making just $5000 over $100,000 annual; the deduction is very little…. ($10,5000 - $100,000)*0.5 = $2,500 a year, let say $4227.27 or less carry over each year until May 2016

So….we are at a total loss if the home ever gets a buyer in May 2014
1st lost our down payment of $43,000
2nd sold rental property fee+tax $16,800 + $20,000 +$13,650.47 +$31,800(already paid in 53 months) = $82,250 the cash we don’t have…

Total damage - $125,250

So, the like kind exchange….. sold the home for $280,000 and because of the so call profit- $91,003.1; we can buy one or more property combine equal $371,003.1 or more. How are we be able to do that? We will be totally broke and trying to pay off the $50,450 associate with this so call “capital gains” 82250-31800 = 50450

Short sale or Foreclose sounds to be better idea now even the tax consequence is less than $50,450.

Please help me on my concept, the math is not 100% just to the point, I hope I am totally wrong!! And hope there is a way out… maybe there is something I don’t know about….

there is not going to be a net loss based on how IRS considers the tax basis, $185000 is and will be the lowest basis...



Thank you…