Message Font: Serif | Sans-Serif
 
UnThreaded | Threaded | Whole Thread (10) | Ignore Thread Prev | Next
Author: gurdison Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121261  
Subject: Re: Capital Gains tax Date: 8/13/2004 1:50 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
< Let it sit vacant for 2 years and then sell it. If house prices remain static for those 2 years, I could walk away with $250k, tax free. The $19k in mortgage payments would be a lot less than the capital gains tax on $250k.>


FWIW, my belief is that the tax consequences should not be the primary driver of an investment decision. A lot can happen in two years. The market can go sour. You also seem to assume that a vacant house will incur no other expenses. That could be a dangerous assumption. Also, if you suffer a casualty loss you may not be covered. I am not sure how many homeowners policies will pay for claims made on a vacant house. If you fail to tell them it is vacant you could be in some deep do do if you suffer a loss. What happens if a water pipe breaks and goes undiscovered for a week? That actually happened to my neighbors vacation home a couple of years ago. They were covered, but it was a very time consuming and emotionally draining process. What happens if the roof develops a leak that goes undiscovered for awhile? What happens if a pedestrian hurts themselves while walking on your property (ice, snow, etc)?

You don't really fill in enough of the blanks to be able to give a full opinion. If you sell now for a 250k gain you would walk away with 212k in your pocket as the LTCG rate is 15%. There is an awful lot to say for that. In pushing real hard to squeeze out the entire 250k for yourself two plus years from now, any number of things can happen. Some of them are good , but a lot of them are bad. You already say you will spend some 19k on mortgage payments in those two years. I think it would be a mistake to assume that you will incur no other expenses at all during that time. Each added expense reduces the distance between what you would walk away with today vs your CG 2 plus years from now. Additionally, I would make very sure of my timeline. If you decided to follow your plan, you would not want to end up in a position where a delayed closing can cost you your exemption.

You may want to get a few more opinions, especially from a pro who knows all of the details of your situation before you settle on any final actions.


B
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (10) | Ignore Thread Prev | Next

Announcements

Disclaimer:
In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
Pencils of Promise - Back to School Drive
"Pencils of Promise works with communities across the globe to build schools and create programs that provide education opportunities for children."
Managing Your Wealth
Our own TMFHockeypop from Rule Your Retirement fame on the TV show Managing Your Wealth.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement