Capital Gains and Losses
Questions and comments about tax rules for buying and selling stocks, mutual funds, real estate and other assets.
capital gains on home sale
Posted by: alloykat, February 19, 2017 11:17PM
This is a hypothetical so I can figure out how the numbers work.

I am trying to figure out what I would pay in capital gains on the sale of my primary residence in CA that I purchased in 2009 for 1 million. My husband and I are both 40 years old and this was our first home.

If we sell for 1.7 million, my profit is 700K minus the 100K realtor commission and the 7.5K first time homebuyers credit so 585K. I know I can also deduct some closing costs and home improvements but let's forget about that for the time being.

1. Am I able to deduct the 500K marital exemption to decrease my gain to 85K or is this only for people aged 65 and older?
2. If I buy another home to be my new primary residence for 1.2 million, then is my capital gain 1.7-1.2= 500K ? IfI can take the marital deduction of 500K in addition to this, then my gain is $0 correct?


Re: capital gains on home sale
Posted by: kaneohe, February 20, 2017 12:06AM
I think it's more along the lines of 1). Gain is 700K and sales commission is 100K w/exemption of 500K for net gain of 100K. no requirement about age 65.
[www.irs.gov]

This other link talks about possible repayment of the 7.5K credit but it looks like you aren't required to do that.
[www.irs.gov]

Re: capital gains on home sale
Posted by: Drewremedy, February 20, 2017 12:40PM
THe replacement purchase rule went out some years ago

YOur choice of words as to my, I and married leaves some open ends as to if you can claim his portion of the marital exemption if you are now living apart for some time ..

Re: capital gains on home sale
Posted by: 47Percent, February 20, 2017 07:00PM


I am not clear how you are arriving at the realtor commission. Usually it is rolled into the purchase price and you don't pay separately. Also, 10% is excessively high any way you look at it.

Even if the "replacement purchase rule" were to be in effect, the calculation would not be as you indicated. You would roll the 'gain' into the new purchase - with some added constraints.

Re: capital gains on home sale
Posted by: triad, February 23, 2017 02:53AM
1997 changed the calculations.

1. No more must be over 55 to use exclusion.
2. No more reinvest to avoid capital gains.

Publication 523 is your friend.

Re: capital gains on home sale
Posted by: Art, February 23, 2017 09:46PM
3. No more Form 2119. (?)

Re: capital gains on home sale
Posted by: triad, February 24, 2017 10:24PM
Art, while form 2119 is no longer issued, if a taxpayer filled one out for their current home, they must be careful when calculating their gain as it will include the gain from the prior residence.

Re: capital gains on home sale
Posted by: Art, February 25, 2017 01:36AM
Yup.



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