Capital Gains and Losses
Questions and comments about tax rules for buying and selling stocks, mutual funds, real estate and other assets.
Rental Property Long Term Capital Gain
Posted by: tanjung66, March 18, 2008 12:17PM
Hi , I am new with this forum.
First of all thank you.

My question is that I sold a duplex last year which partly used as rental and the other as owner occupied? We lived there for 2 years and owned the building for only 3 years. Do I have to claim Long Term Capital Gain?

If yes, how do I calculate the sale price? Is it as shown below:
Sale Price - Realtor Commission - (2006) Taxes

Is Pre-Payment penalty added to selling expense?

Lastly, Can I still claim other expenses involved with the property in my Schedule E?
Thanks again.

Divide the selling price
Posted by: jainen, March 18, 2008 01:24PM
>>I sold a duplex<<

Treat this as two sales. Divide the selling price and costs of sale in a way that makes sense, probably 50/50 if the two units are similar in size and condition. Presumably you have already done this when you divided the original basis for purposes of depreciation, but don't forget to add the land value back in to that.

For the personal side, take the Section 121 exclusion if you are eligible and choose to, otherwise report the capital gain on Schedule D. Report the sale of rental property on Form 4797.

The prepayment penalty will already be included as interest on the mortgage statement. Deduct the rental half in the usual way on Schedule E, along with property tax and other normal expenses.

There are some tricky parts to all this, such as seller credits in escrow, depreciation allowed or allowable, and timing. These are generally routine issues for a tax professional, so I recommend you get help this year.

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