What taxes do I need to pay when I sell my house?

January 16, 2006

Subject:  Capital gains tax
From:  Valerie
Date:  Sat, 31 Dec 2005

My mother sold her home on the beach in Southwest Florida in Spring, 2005 and purchased a duplex off the island in cash. She now has to pay capital gains tax on her profit. She's 75 years old and a widow. She was told only $250,000 is exempt – which is the amount she paid for her new home. Does she have two years to decide whether to pay the taxes or reinvest, or does she have to pay by April 1, 2006?

Answer

Date:  Wed, 04 Jan 2006

Hello Valerie,

I suggest that you look at the report cited above. The old rules for reinvestment on sale of a residence have been repealed. The $250,000 exclusion does not relate to the reinvestment in a new residence. Any tax due should be paid by April 15, 2006. You mentioned that your mother is a widow. If her husband died after buying the former residence, she may be entitled to a basis adjustment based on his date of death value for his share of the home. Your mother should visit a local tax advisor for help.

Good luck!
Mike Gray

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