capital gains

[JUL]

Does anyone know the rules on capital gains if house not occupied for 4 years but moved for work and now want to sell...was rented after not selling but now person wants to sell and not pay cap gains...also can they deduct costs updates like new carpet from profit/gain and realtor fees

 

[GoodWitch58]

best to talk to your accountant...every situation is a bit different...

 

[30ashopper]

Does anyone know the rules on capital gains if house not occupied for 4 years but moved for work and now want to sell...was rented after not selling but now person wants to sell and not pay cap gains...also can they deduct costs updates like new carpet from profit/gain and realtor fees

You always pay capital gains, but there is an exemption if you've lived in it for a period of time over the last five years. I can't say for sure, but I think it's either 2 out 5 or 3 out of 5. If you haven't lived in it in the last five years (and rented it or left it vacant) I don't believe you qualify for the exemption. Definitely check with a tax guy though to be sure. The rules recently changed this summer through the foreclosure bail out bill.

 

[waterst1]

Does anyone know the rules on capital gains if house not occupied for 4 years but moved for work and now want to sell...was rented after not selling but now person wants to sell and not pay cap gains...also can they deduct costs updates like new carpet from profit/gain and realtor fees

Good to hear someone has a house that has enough value to worry about capital gains. I'd like that problem...

 

[Smiling JOe]

Not enough info given to give you an answer. You didn't mention that you lived there at all during the last five years. The general rule is that you must live there two out of the last five years to qualify for the tax exemption on capital gains. There may be partial exemption if you lived there for one year, but you really should sit down for 15 minutes with an accountant to get the complete scoop. (I am not an accountant.)

 

[TooFarTampa]

You always pay capital gains, but there is an exemption if you've lived in it for a period of time over the last five years. I can't say for sure, but I think it's either 2 out 5 or 3 out of 5. If you haven't lived in it in the last five years (and rented it or left it vacant) I don't believe you qualify for the exemption. Definitely check with a tax guy though to be sure. The rules recently changed this summer through the foreclosure bail out bill.

It's 2 out of 5, so at first glance the seller wouldn't qualify for an exemption. The "moving for work" part may change things, though -- but it appears the seller would currently have to be residing in the house to qualify for what the IRS calls a "reduced maximum exclusion."

From IRS Pub 523:

Reduced Maximum Exclusion

You can claim an exclusion, but the maximum amount of gain you can exclude will be reduced if either of the following is true.

You did not meet the ownership and use tests, but the reason you sold the home was:

A change in place of employment,

Health, or

Unforeseen circumstances (as defined later).

Distance safe harbor. A change in place of employment is considered to be the reason you sold your home if:

The change occurred during the period you owned and used the property as your main home, and

The new place of employment is at least 50 miles farther from the home you sold than the former place of employment was (or, if there was no former place of employment, the distance between your new place of employment and the home sold is at least 50 miles).

The seller may want to contact an accountant, but it may be easier and cheaper to just read through IRS pub 523, which pretty much covers it all:

http://www.irs.gov/publications/p523/ar02.html#d0e2017

The relevant passages are under the section "Excluding the Gain."

The only caveat would be how the rules have changed since the legislation 30Ashopper refers to. Not sure if any adjustments have been included in the pub.

 

[JUL]

Thank you all! That helps and I realize an acct /tax advisor is the best.
I knew I could get the answer from y'all!