Originally Posted by jason11972
#1;The home has been our primary residence since he purchased it in the Trust name 8 years ago....but we cannot stay another two years.
#2:We've decided that we really have no choice....we MUST sell the home. The HOA is $435/mo...which her father was paying for us since it was in the Trust name. Now that he's deeded it to my wife he says we are responsible for paying the HOA and property taxes now along with any other maintenance needed (we've had 7 plumbing leaks in 8 years here that he's paid for). The HOA alone is too high for us to stomach so we MUST sell.
#3;So it sounds like you're saying that since he purchased the home in the Trust name for $740K, that is his cost basis and that cost basis transfers to us. Since the home is now worth almost $200K less than that...then it means we have no capital gains to worry about and any capital gain/loss would be dealt with by him when he gifted it to us? And in addition to paying the closing costs associated to selling...we need to plan on paying roughly another $10K? Can you help me understand where that figure comes from? His purchase price was $740K 8 years ago. We've used home as primary residence that entire time. He transfers to us and along with that cost basis of $740K. Home is now listed for $565K....so the capital loss was something he absorbed when he deeded property to us. Worst case...we sell for $550K.
#4;Where does the $10K tax come from?
#1;I mean in order for the sale to be exempt, the home must be considered a primary residency based on IRS rules. These rules state that you must have occupied the residence for at least two of the last five years.
#2;As long as you claim itemized deductions on Sch A of 1040, you can deduct pty taxes;however, HOA fees are not deductible as they are your ordinary expenses of living. if you rented the unit out to tenants, you could deduct it as part of your operating expenses for rental property, but it is not deductible for your personal residence
#3;Then your adj basis depends on the sale transaction; assume that his OC was $740K and its current FMV is $540K, then if you sell over $740K, it’d be your LTCG. Say you sell it for $750K then your taxable LTCG is $10K and UNLESS your tax bracket is higher than 15%, your CG tax liab. is $0 If your marginal tax rate exceeds 15% , then you need to pay $1.5K as CG tax;$10K*15%.
If you sell it between $540K and $740K, then no gain or loss so you do not have to pay CG tax.
If you sell it lower than $540K, then it’d be your LTCL;say you sell it for $530K, then your LTCL’d be $10K; $540K-$530K.
#4; The IRS does not allow you, the seller, to deduct the closing costs from your tax return. Only the property taxes allocated to you are deductible. The other closing costs adjust the net proceeds from the sale and that is used in determining any gain and therefore any capital gains tax, if any, that would be due.
Can you help me understand where that figure comes from? His purchase price was $740K 8 years ago. We've used home as primary residence that entire time. He transfers to us and along with that cost basis of $740K. Home is now listed for $565K....so the capital loss was something he absorbed when he deeded property to us. Worst case...we sell for $550K. “==..Pleae read above , then I guess you’d understand what it mean
Where does the $10K tax come from?”=>>$10K was from the hypothetical assumption that I gave you. Please just disregard it.