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Does the Deemed Sale and Repurchase Election apply to one's residence. If so, does the $250k cap gains deduction also apply to this transaction??
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How much can I deduct on capital gain on my personal residence? I live in California. Thanks Dana
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How much can I deduct on capital gain on my personal residence? I live in California.

If you've owned and lived in your principal residence for 2 of the 5 years preceding the sale, you can exclude $250,000 of gain ($500,000 on a joint return), assuming you've excluded gain from another sale within the previous 2 years. There's an article in the FAQ and information in IRS Publication 523.

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Phil Marti
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JOEGGFOOL: "Does the Deemed Sale and Repurchase Election apply to one's residence. If so, does the $250k cap gains deduction also apply to this transaction??"

Our esteemed Bob78164 wrote about this possibility months (and months) ago (search for "Shore sale") if you are interested, and my recollection of his conclusion after further research (including correspondence with Kaye Thomas [KATinChicagoLand here on TMF boards] and the force behind the fairmark website) was that the $250k single (or $500k married) capital gain exclusion could not be applied in conjunction with the deemed sale of a primary residence.

I am certain that Bob will be along and fill in the details so that you need not rely upon my faulty memory.

Regards, JAFO
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JOEGGFOOL writes:

Does the Deemed Sale and Repurchase Election apply to one's residence. If so, does the $250k cap gains deduction also apply to this transaction?

I reply:

I had that very idea about two years ago. Run a search on this board for "Shore sale." Be sure to read the WHOLE thread, because I quote the opinion of Kaye Thomas, author of www.fairmark.com , a tax attorney (unlike me). Unfortunately, the answers appear to be yes and NO, in that order. In other words, it's a really BAD idea because you will pay taxes on gain that likely otherwise would have been excludable from income. --Bob
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Run a search on this board for "Shore sale."

Here's a link to the thread, which was before my time on the board: http://boards.fool.com/Message.asp?mid=10785869. I had a great time reading it, but I've always enjoyed a treasure hunt.

The way this whole thing weaves together is an excellent example of why the answer to tax questions is so often "maybe."

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Phil Marti
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Wow - I thought I was beginning to get a handle on capital gains taxes, and then this thing popped up.... One quick question - Can I apply the DS&R Election to a stock that is valued below purchase price and take a capital gains loss in 2001?
Thanks,
~OC~
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Can I apply the DS&R Election to a stock that is valued below purchase price and take a capital gains loss in 2001?

No. I believe this is covered in the FAQ.

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Phil Marti
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No. I believe this is covered in the FAQ.

Thanks for your reply. For a change, I had actually checked the TS FAQ prior to posting, but didn't see anything relevant. I still can't find it, but it's probably there.

~OC~
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For a change, I had actually checked the TS FAQ prior to posting, but didn't see anything relevant. I still can't find it, but it's probably there.

The pesky critters have a way of hiding from you. Thanks for trying. Here's a link: http://www.fool.com/school/taxes/1999/taxes990924.htm

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Phil Marti
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