Case Study : Home Sale Gain Exclusion

10. Gains/Losses are "generally" recorded at the same amount for both Capital Accounts and Tax Basis.

Capital gain or loss that happens to a dwelling that is a taxpayer’s main residence is

Capital income is income generated by investing into fixed assets over time, rather than from work done using the asset. If a business sell its property at a profit ,that profit is called capital gain and is taxable according to the period the property was held by the business before it is sold. Examples of capital income are personal savings, bank loans acquired and share issuing by a business etc. Comparing to revenue income, capital income is money invested by the owner himself or herself or other investors to set up the business and it is not a day to day function for the business.

As seen in Chapter 15 of Real Estate Principles by Charles J. Jacobus, property tax is a large source of income for local governments. When property taxes are not paid, a lien is placed on the property. If property taxes are not paid, this gives the government the right to seize the property. This is currently happening to Bill Davies, a developer from Chicago, Illinois.

In summary, John and Jane would not be able to use 1031 tax exchange to purchase the new more expensive home. Due to the gain of buying an expensive house, it would not be considered “like-kind”. The additional money that is paid to acquire this

Helen easily sells the San Francisco house in which she and Tom live. Helen is the sole owner of the house. However, she has a harder time finding the right home in Portland. Helen has to make several trips to Portland before buying a house under construction. It will not be available for

In 2013 Marianne sold land, building and equipment with a combined basis of $150,000 to an unrelated third party and in return received an installment note of $80,000 per year for five years. Of the $250,000 gain on sale, $150,000 was classified as Section 1245 gain and the remaining $100,000 was Section 1231 gain. In 2013, Marianne had a capital loss carryover of $60,000, $50,000 of which she used to offset her Section 1231 gain; she recognized no Section 1245 gain. The following year she recognized $40,000 of 1245 gain and $10,000 of Section 1231 gain which she promptly offset with the last $10,000 of the capital loss carryover. In 2015, she recognized $50,000 Section 1245 gain and no Section 1231 gain.

Once a gain or loss is recognized, a taxpayer must determine how the recognized gain or loss affects the taxpayer’s tax liability. The character depends on a combination of two factors: purpose or use of the asset and holding period. The purpose or use of the asset is important because the law does not treat all assets equally. The general use categories are: (1) trade or business, (2) for the production of income (rental activities), (3) investment, and (4) personal. Based on these criteria, we can categorize an asset into one of three groups: (1) ordinary, (2) capital, or (3) section 1231. Characterizing the gain or loss is important because all gains and losses are not equal. Ordinary gains and losses are taxed at ordinary income rates, regardless of the holding

Generally, a realized gain from sale of personal residence can be excluded from gross income under Exclusion 121. The amount realized is the selling price of the property less any disposition costs. The adjusted basis is then determined and the amount is subtracted from the realized sum. This will give you the amount of loss or gain from the sale of the property. Since the couple occupied the sold home for at least 2 of the last 5 years they fulfill the requirements for exclusion 121 treatment. The exclusion amount for the couple if filing jointly is $500.000 and the calculation would be as follows:

He can deduct the fair market value of the land without recognizing the $40,000 appreciation as income.

Per Section 1038(a) (1)(2) and Reg §1.1038-1.(a) (3), seller can reacquire of the property because of indebtedness arouse from previous sale. Rich and Sheri reacquired the title of their house by this section code. § 1038(a) (1) (2) also implies that there will be no gain or loss from

This year, you sold your former primary residence (which was purchased in 2010), and were concerned about the tax effects that this sale would have on your return. Although the sale of your home resulted in a realized gain, it will not increase your gross income on your 2014 tax return. This is because the amount of gain you earned on the sale falls inside the allowable excludable limit offered for taxpayers selling their personal residences. Additionally, though taxpayers are typically required to repay the amount of the First-Time Homebuyer Tax Credit claimed in the year of purchase when their home is sold, you are not required to. This is because an exception was made for homebuyers in 2009 and 2010, for which the recapture of the credit was waived.

This case involves an investigation of the factors that affect the sale price of Oceanside condominium units. It represents an extension of an analysis of the same data by Herman Kelting (1979). Although condo sale prices have increased dramatically over the past 20 years, the relationship between these factors and sale price remain about the same. Consequently, the data provide valuable insight into today’s condominium sales market.

I agree with you, selling and moving from her home would cause Mrs. M financial and emotional burden. Moving could cause her health to decline and this would be the doctor's fault. Mrs. M's community health nurse should speak up and be a patient advocate for Mrs. M. If the physician is unwilling to consider other options, than Mrs. M should find another doctor. A new doctor could hopefully provide a plan of care that would involve the entire health team. Mrs. M deserves proper patient care.

The IRS addresses the topic of capital assets in Section 1221 (Legal Information Institute). Within this section, rather than defining what qualifies as a capital asset, The Code lists items that are not capital assets. This backwards approach has led to a grey area in regards to what classifies as a capital assets. As a result, many court cases have been on this topic. Once it is determined whether an asset is “capital in nature”, the various tax treatments can be considered. Specifically, capital assets sold at a gain that are held for less than one year at the time of sale will be classified as a short term gain (Investopedia, 2015). Short term capital gains can be used to offset short term capital losses for both individuals and corporations, however any excess short term capital gains will be taxed at the taxpayer’s regular tax rate. In addition, long-term capital gains experienced by a corporation are not subject to the more favorable capital gains rate. Also, when