Zero Capital Gains Tax... - Posted by YS

import · October 24, 2003, 7:30am

Posted by Evan on October 24, 2003 at 12:14:05:

Yes, the capitol gain is tax free for owner occuppied, two years.

Like the other idea of refi, then lease option. Could get $75-80k, possibly more, depending on lender.

Cheers,

Evan

import · October 24, 2003, 7:30am

Zero Capital Gains Tax… - Posted by YS

Posted by YS on October 24, 2003 at 07:30:20:

Question for all:

Lets say I own a home worth $100,000, with $0 debt, and I want to sell it. I want to CASH OUT ONLY, no 1031 exchange, no seller financing, etc.

Would it be possible for me to refinance the house for a $100,000 mortgage (refi being a non-taxable event), then sell my home? Wouldn’t then I report a $0 gain for taxation purposes and pay Zero Capital Gains Tax?

Any thoughts are GREATLY appreciated!!

have a great day

YS

import · October 24, 2003, 9:41am

Re: Zero Capital Gains Tax… - Posted by Jim N

Posted by Jim N on October 24, 2003 at 09:41:33:

Yes the refinance monies that you pull out are tax free"until" you sell. Why not refi and then lease option that bad boy?

JN

import · October 24, 2003, 8:16am

Unfortunately NO, NO, & NO… - Posted by David Krulac

Posted by David Krulac on October 24, 2003 at 08:16:26:

while the amount of financing, DOES have a bearing if you are doing a 1031 Tax Free Echange;

when you are selling a property, the amount of the mortgage does NOT even enter into the computation.

The calculation is Selling price minus purchase price, minus selling costs, minus purchase costs equal capital gains. Property sold since May 6, 2003 for most people the capital gains rate will be 15%.
(This presumes the property was owned for at lesat 1 year to be eligible for the favorable capital gains treatment versus ordinary income.)

If the property has been depreciated OR had been eligible for depreciation, then that is further comsidered in the calculations as depreciation taken or allowed is subject to “RECAPTURE” at the rate of 25%.

AS an example:

Property sold for $100,000
Costs of selling
Commission/tax etc.$10,000

Purchase price $50,000
Purchase costs $3,000

Capital gain equals $100,000-$10,000-$50,000-$3,000=

$37,000X .15 = $5,550 Federal Income Capital Gains Tax

Any state and local income tax would be extra.

Now if during your ownership you took $18,000 of depreciation that would be taxed at $18,000 x 25% or
$4,500.

So your total tax bill would be $5,550 + $4,500 = $10,050.

HTH

David Krulac
Central Pennsylvania

import · October 24, 2003, 8:58pm

Re: Unfortunately NO, NO, & NO… - Posted by YS

Posted by YS on October 24, 2003 at 20:58:58:

Thanks for your insight David
YS

import · October 24, 2003, 11:33am

I thought that… - Posted by neophyterei

Posted by neophyterei on October 24, 2003 at 11:33:19:

I thought that if a home owner owned and occuppied a property for at least two consecutive years then the first $250,000 was federal tax free? It is $500,000 for a married couple?

import · October 24, 2003, 4:43pm

you are correct BUT… - Posted by David Krulac

Posted by David Krulac on October 24, 2003 at 16:43:56:

the original question mentioned 1031 exchange which does NOT apply to owner occupied property only investment property, therefore my answer for investment property stands.

import · October 24, 2003, 1:53pm

Re: I thought that… - Posted by E.Eka

Posted by E.Eka on October 24, 2003 at 13:53:49:

You’re right.