Will I have to pay capital gains on my townhouse?
February 18, 2004
Subject: capital gains question
Date: Fri, 23 Jan 2004
In August, 2003, I sold the home that I lived in for the past 27 years. We bought it for $48,000 and I sold it for $275,000. I received net cash of $210,000 from the sale. I bought a townhouse in October, 2003 for $380,000, paying $180,000 down plus a mortgage. While the townhouse has potential, I think I have bitten off more than I can chew. I would like to sell it this spring and down size. Will I have to pay tax on capital gains, since I haven't lived here for two years?
Date: Mon, 02 Feb 2004
Remember you have a cost or tax basis of $380,000 for the townhouse. After you pay the commission and selling expenses, you might not have any gain from the sale. If you do have a gain, it will be taxable. Be sure to have all of the facts for estimating the gain or loss. If you live in California, there probably be income tax withholding based on the total sales price. For this reason, you might want to wait until the end of the year to sell the house so you can recover overwithheld tax by filing your income tax returns shortly after the sale.
We have more answers to frequently asked real estate tax questions! We also offer up-to-date information about new tax real estate tax developments in Michael Gray, CPA's Real Estate Tax Letter.
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