Posted on: 22nd Apr, 2010 07:37 pm
I am in great financial need to sell some investment property due to a nasty divorce. The property I would sell would easily pay for the mortgage on my home I live in (and am trying to save)....that is..until I figure in the capital gains tax. I bought the investment property a long time ago and it's gone up in value a LOT since then. It's a vacant lot so there has been no improvements made to it over the years. I have paid water/sewer "assessment" fees and a steet paving assessment. Would this count as improvement??
Also.....is there anyway to try to avoid paying so much capital gains tax? Can I transfer the property into my son's name (as a gift deed), and then have him to sell the property for me? If this was done, wouldn't the "value" of the home at the time of transfer be used to figure capital gains profit (rather than what I originally paid for it)? And how would "short term" capital gains be versus long-term?
Here's the exact figures. I purchased the property for $15,000 and I can sell it for $85,000. If I transfer it to my son as a gift, how much would be alloted as a "gift from a parent"...and would the land value be based on the value today rather than the original $15,000?
And how exactly do you figure the percentage of how much capital gains tax I'll have to pay?
Thanks!
Also.....is there anyway to try to avoid paying so much capital gains tax? Can I transfer the property into my son's name (as a gift deed), and then have him to sell the property for me? If this was done, wouldn't the "value" of the home at the time of transfer be used to figure capital gains profit (rather than what I originally paid for it)? And how would "short term" capital gains be versus long-term?
Here's the exact figures. I purchased the property for $15,000 and I can sell it for $85,000. If I transfer it to my son as a gift, how much would be alloted as a "gift from a parent"...and would the land value be based on the value today rather than the original $15,000?
And how exactly do you figure the percentage of how much capital gains tax I'll have to pay?
Thanks!
Hi donna,
I don't think payment of water/sewer and street paving assessment fees will be considered as improvement to the property. If you have do any major construction or improvement, you can add that to the original cost of the property while calculating the capital gains tax.
You can transfer the property into your adult son's name as a gift. When your son would sell the house, the cost basis of the property would be the fair market value (FMV) of the property at the time of the transfer. Thus, at the time of the sale there will be less profit on paper and your son will have to pay less amount of capital gains tax. When you gift the property to your son, you can claim annual gift tax exemption of $13k (double the amount, if married and filling jointly), as well as an lifetime gift tax exemption of $1 million.
However, it is better to consult an accountant or a tax professional in this regard as they are the right people to suggest you the ways to avoid paying too much of capital gains tax.
I don't think payment of water/sewer and street paving assessment fees will be considered as improvement to the property. If you have do any major construction or improvement, you can add that to the original cost of the property while calculating the capital gains tax.
You can transfer the property into your adult son's name as a gift. When your son would sell the house, the cost basis of the property would be the fair market value (FMV) of the property at the time of the transfer. Thus, at the time of the sale there will be less profit on paper and your son will have to pay less amount of capital gains tax. When you gift the property to your son, you can claim annual gift tax exemption of $13k (double the amount, if married and filling jointly), as well as an lifetime gift tax exemption of $1 million.
However, it is better to consult an accountant or a tax professional in this regard as they are the right people to suggest you the ways to avoid paying too much of capital gains tax.