Posted on: 25th Apr, 2006 10:53 am
I have a question. My parents are divorced and one is planning to buy out the other of the remaining property that they currently own. The home is located in the state of California, in Alameda County. If the parent who has been living there the last 27 years (as their primary residence) were to receive $260,000 from the buy out , how much of that amount would be taxed?
And also, who handles quit claims. Do we need a lawyer for this? Or does that title company handles this?
Thanks, r.ramirez
And also, who handles quit claims. Do we need a lawyer for this? Or does that title company handles this?
Thanks, r.ramirez
ramiraz,
as far as tax on capital gain is concerned, your parents will be allowed to exclude $2,50,000 of the capital gain from the taxable income.
this exclusion is provided when the seller occupies the home for 2 years of the last past five years prior to sale. in your parent's case the situation is automatically satisfied since they are living there for 27 years.
the capital gain needs to be calculated for the tax purpose. regarding your second question, the transfer can be done through a quit claim deed. you should get a lawyer to guide you for any real estate transfers.
blue
as far as tax on capital gain is concerned, your parents will be allowed to exclude $2,50,000 of the capital gain from the taxable income.
this exclusion is provided when the seller occupies the home for 2 years of the last past five years prior to sale. in your parent's case the situation is automatically satisfied since they are living there for 27 years.
the capital gain needs to be calculated for the tax purpose. regarding your second question, the transfer can be done through a quit claim deed. you should get a lawyer to guide you for any real estate transfers.
blue
Ramirez,
The tax that is required to be paid depends on the taxable gain made from the sale of your house. For that you need to find out the cost basis of your house.
This includes the (purchase price + purchase costs + improvements + selling costs) - Accumulated depreciation.
After that the profit or loss needs to be calculated which is equal to (Selling price - Cost basis). Finally the taxable gain is calculated by subtracting the maximum or partial exclusion from the profit.
May be that will be a bit difficult to calculate for you. It's better to consult a tax advisor to calculate the tax from the sale. Also, you must be aware that individuals can exclude up to $250,000 in profit from the sale of their main home under some conditions.
Thanks,
Caron
The tax that is required to be paid depends on the taxable gain made from the sale of your house. For that you need to find out the cost basis of your house.
This includes the (purchase price + purchase costs + improvements + selling costs) - Accumulated depreciation.
After that the profit or loss needs to be calculated which is equal to (Selling price - Cost basis). Finally the taxable gain is calculated by subtracting the maximum or partial exclusion from the profit.
May be that will be a bit difficult to calculate for you. It's better to consult a tax advisor to calculate the tax from the sale. Also, you must be aware that individuals can exclude up to $250,000 in profit from the sale of their main home under some conditions.
Thanks,
Caron
Hi Ramirez,
Quit claim deed is the procedure that your parents can adopt to have the real estate transfer. You can visit this page on quit claim to have an idea. For tax implication on quit claim this section will be helpful.
James
Quit claim deed is the procedure that your parents can adopt to have the real estate transfer. You can visit this page on quit claim to have an idea. For tax implication on quit claim this section will be helpful.
James