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Author: yankeesmyteam Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121061  
Subject: sale of property Date: 3/11/2001 9:21 PM
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Phil,

Hope you can shed some light. I have a property that was sold to me for $1, when really the property was worth 75K so my cost basis is 75K. I did not rent it out, my mother in law lived there rent free, while I rented an apt somewhere else in the state.

I recently sold the house that my mother in law lives in for about 115K and I am taking some of the proceeds and using it toward the purchase of a new home.

I never claimed this as a rental property, since I collected no rent. Do I have to pay capital gains, and if so, what is my best bet for lowering my tax burdon with uncle sam next year.

thanks for your help
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Author: eslovick Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48186 of 121061
Subject: Re: sale of property Date: 3/11/2001 9:32 PM
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I have a property that was sold to me for $1, when really the property was worth 75K so my cost basis is 75K.
If the person who sold it to you claimed it on their taxes as a $1 sale, then that would be your cost basis.

Since it wasn't your primary residence, I think you are stuck on the taxes.

But since you asked Phil, he probably has better info...
Just throwin' in my $.013 (2 cents after taxes).

Beth

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Author: pmarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48209 of 121061
Subject: Re: sale of property Date: 3/12/2001 9:41 AM
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I have a property that was sold to me for $1, when really the property was worth 75K so my cost basis is 75K.

I doubt it. This looks like a gift, and your basis would be the donor's basis, not the value at the time of transfer. See Publication 551.

I did not rent it out, my mother in law lived there rent free, while I rented an apt somewhere else in the state.

I recently sold the house that my mother in law lives in for about 115K and I am taking some of the proceeds and using it toward the purchase of a new home.

I never claimed this as a rental property, since I collected no rent. Do I have to pay capital gains, and if so, what is my best bet for lowering my tax burdon with uncle sam next year.


Yes, you'll have a (presumably) long-term capital gain taxable in 2001. You have a year to rummage through your records to make sure you include every basis item from capital improvements, which will reduce your taxable gain.

Phil Marti
VITA Volunteer

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Author: p4ward Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48311 of 121061
Subject: Re: sale of property Date: 3/13/2001 1:27 PM
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To Phil Marti: I also sold a rental property in 2000. I have two questions; Do I have one or two years to "settle" the sale of that property, knowing that cap gains will be involved, and I would like to rummage further to find legitimate expenses for improvements over the twenty years I owned the property.(?)
And, I am a part owner of a cabin in the mountains, so would it be possible to invest proceeds from the sale of the rental to the mountain cabin and rent it out for more than two weeks a year. Can this be done to avoid the cap gains? To what extent and how much must be 'invested' into the cabin and for how long must it be a rental?
p4ward

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Author: pmarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48342 of 121061
Subject: Re: sale of property Date: 3/13/2001 7:23 PM
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I also sold a rental property in 2000. I have two questions; Do I have one or two years to "settle" the sale of that property, knowing that cap gains will be involved, and I would like to rummage further to find legitimate expenses for improvements over the twenty years I owned the property.(?)

A sale in year 2000 must be reported on your return for 2000.

And, I am a part owner of a cabin in the mountains, so would it be possible to invest proceeds from the sale of the rental to the mountain cabin and rent it out for more than two weeks a year. Can this be done to avoid the cap gains? To what extent and how much must be 'invested' into the cabin and for how long must it be a rental?

It's too late to do anything now. It's possible to arrange for a tax-free exchange of income properties, but it has to be set up before you sell.

Phil Marti
VITA Volunteer

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Author: p4ward Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48345 of 121061
Subject: Re: sale of property Date: 3/13/2001 7:42 PM
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Thank you Phil. Just to be clear, I will have to report the sale AND pay the cap gains when filing my 2000 taxes (April 16, 2001)? I thought that I had one or two years to reinvest the proceeds into a like property. NO?
p4ward

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Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48375 of 121061
Subject: Re: sale of property Date: 3/14/2001 3:54 AM
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Thank you Phil. Just to be clear, I will have to report the sale AND pay the cap gains when filing my 2000 taxes (April 16, 2001)?

That's correct.

I thought that I had one or two years to reinvest the proceeds into a like property. NO?

And I thought that stock tip from my brother-in-law's co-worker's sister's friend was a sure thing. ;-) We are both wrong.

It sounds like you're describing the old section 1034 rules which applied only to your principal residence. Those rules (which wouldn't have applied to your situation, anyway) were repealed in 1996. (I think?)

--Peter

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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: 48394 of 121061
Subject: Re: sale of property Date: 3/14/2001 11:33 AM
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<Just to be clear, I will have to report the sale AND pay the cap gains when filing my 2000 taxes (April 16, 2001)?>

Yes!


<I thought that I had one or two years to reinvest the proceeds into a like property. NO?>


NO! I guess the professional advice you got BEFORE selling the property was only worth what you paid for it.


BRG


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Author: Nathar Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48658 of 121061
Subject: Re: sale of property Date: 3/18/2001 11:23 PM
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What expenses related to selling a rental property can you add to your basis (deduct from your capital gains)? I know that closing costs paid by the seller are tax deductible, what about other pre-payments such as seller paid PMI payments, etc.? If the property needs repairs and instead of paying to fix them myself I just give the buyer cash back at closing, can I reduce my capital gain by the same amount I give the buyer?

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