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It is my understanding that the capital gains tax on investment real property is 15% in 2005 (with my income tax bracket). The question I have is how do I calculate the actual profit amount?
For example,
purchase price was $100k plus $12k in utilities installation fees (gasline, electricity, etc.) plus homeowner fees
sales price was $200 minus realtor fees

Are there guidelines on what is included in purchase and sale sticker price? Is it simply the sticker price, nothing else can be included or subtracted?


Tax life is never that simple. The first hurdle you must cross is to determine that you actually have investment property and that you are not considered as being in the business of buying and selling real estate. It doesn't take much to cross the threshold into "business" classification.

Assuming it is investment property, your gain is the difference between the selling price and your adjusted cost basis, the difference being further reduced by certain allowable expenses associated with the sale. Your adjusted cost basis is the original $100K plus $12K in utility installation fees. The homeowner fees may or may not add to your basis (we would need to know more about what the fees were for). There may be other capital improvements made to the property over the period of ownership which would further increase the cost basis.

You haven't said how long you owned the property. It must be more than 1 year to qualify for the 15% rate.

You may find useful information in one or more of the following IRS Pubs: 523, 527, 544, 550, 551. All are available at the IRS website at www.irs.gov/pub/irs-pdf/pXXX.pdf where you substitute the appropriate number for "XXX".

Ira
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