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Real estate values in my area have declined dramatically. If I sell some buildings at a loss, what can I apply that loss against come tax time?
( I was thinking if I did manage to sell the property I could cash in some US Savings bonds and apply the loss against the interest earned on the bonds...but someone told me I couldn't do this.....can I, or can't I)
Any IRS publication where I can look this up?
Thanks for your help.
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Real estate values in my area have declined dramatically. If I sell some buildings at a loss, what can I apply that loss against come tax time? ( I was thinking if I did manage to sell the property I could cash in some US Savings bonds and apply the loss against the interest earned on the bonds...but someone told me I couldn't do this.....can I, or can't I) Any IRS publication where I can look this up?


Any gain or loss from the sale or disposition of an asset is a capital gain or loss. Capital gains and losses can be short term (held less than a year) or long term (held a year or more). Gains and losses can offset each other and if you have a net loss, that can be used to offset ordinary income, interest income, etc. but only up to a maximum of $3000 per year. If you have a net loss greater than than, you'll have to carry it forward using up to $3000 each subsequent year.

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>>Real estate values in my area have declined dramatically. If I sell some buildings at a loss, what can I apply that loss against come tax time?
( I was thinking if I did manage to sell the property I could cash in some US Savings bonds and apply the loss against the interest earned on the bonds...but someone told me I couldn't do this.....can I, or can't I)
Any IRS publication where I can look this up?
Thanks for your help.>>

If these properties are rentals, the loss is fully deductable and can offset other income,, such as interest. The loss is claimed on schedule 4797, see the instruction to the form it should answer your questions.

If you live in a state with income tax, I might not want to use interest income to offset the loss, because the US savings bonds are state tax free and you might lose this benefit.

Good luck

EG

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<<Real estate values in my area have declined dramatically. If I sell some buildings at a loss, what can I apply that loss against come tax time?>>

Both answers that you received are basically correct. If you are using the properties purely for investment purposes (like a second or third home), then they are capital assets and those losses can only be used to offset capital gains (plus $3k that you can write off against ordinary income). For more information on this, check out the "netting gains and losses" article in the Taxes FAQ Area.

If they are rental properties, then...as pointed out...the loss is allowed in full on the sale of the property. This is true regardless of if you have any other gains or not.

<<( I was thinking if I did manage to sell the property I could cash in some US Savings bonds and apply the loss against the interest earned on the bonds...but someone told me I couldn't do this.....can I, or can't I)
Any IRS publication where I can look this up? >>

Again, tell us how the property is being used, and we'll be happy to tell you how it's handled for tax purposes.

TMF Taxes
Roy
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<<If you are using the properties purely for investment purposes (like a second or third home)>>

I think this may need some clarification, it seems that words with different meanings are use to say the same thing. To my thinking the words purely for investment of a second home are conflicting. If the house is a second home, like a winter or summer house, a loss on the sale would be a personal loss and not deductable at all. If you own a vacant house that is just sitting unused, its deem held for investment and any loss on its sale is capital, and can only offset $3,000 of ordinary income a year.

EG
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<<I think this may need some clarification, it seems that words with different meanings are use to say the same thing. To my thinking the words purely for investment of a second home are conflicting. If the house is a second home, like a winter or summer house, a loss on the sale would be a personal loss and not deductable at all. If you own a vacant house that is just sitting unused, its deem held for investment and any loss on its sale is capital, and can only offset $3,000 of ordinary income a year.>>

ABSOLUTELY CORRECT, EG. Great catch. I was trying to make a point and got the words all screwed up...and provided a simply AWFUL example. Thanks to EG for catching it and clearing it up.

TMF Taxes
Roy

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My husband and I sold a business in 1994 and we held the mortgage. In Jan. of 1999 the new owners went bankrupt and we got the property back. My husband died in March of 1999 and the estate was in a mess. I owed three years back taxes on the property and my only other income stopped for ten months. I managed to rent all the buildings for a period of six months when that business went bankrupt. This year I have only been able to rent one of the (4) buildings for a short time. I have the property up for sale. If I manage to sell the property it will be at a loss. Can I apply that loss against interest income gains from U.S. Savings Bonds?
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My husband and I sold a business in 1994 and we held the mortgage. In Jan. of 1999 the new owners went bankrupt and we got the property back. My husband died in March of 1999 and the estate was in a mess. I owed three years back taxes on the property and my only other income stopped for ten months. I managed to rent all the buildings for a period of six months and then that business moved. This year I have only been able to rent one of the (4) buildings for a short time. I have the property up for sale. If I manage to sell the property it will be at a loss. Can I apply that loss against interest income gains from U.S. Savings Bonds?
Thank you for your help.
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