Capital Gains Tax Question
I have a property that I have held title to for 5 months. Put 10,000 out of my own pocket in for repairs. My payoff is 41,500 and appraisal came back at $76,000. I have an offer from a landlord to purchase from me for 65,900. If I sell, is there anyway I can avoid or defer the Capital gains?
Thanks,
Tim
First, there will be no capital gains from this transaction. If you held it for only 5 months to fix up and resell, then this was a dealer transaction, and you profit will be considered normal income.
You didn't say how much you paid for the property, but if we assume that it is the payoff amount of $41,500, then you could roughly estimate your taxes like so:
Purchase price of $41,500 + $10K in fixup costs (if you keep records/receipts) = $51,500. This is your basis.
$65,900 - $51,500 = $14,400. This is your taxable profit. Assuming a 30% tax bracket, your tax on this would be about $4300. Just put this amount back (and maybe a little more for safety) until it's time to pay ol' Uncle Sam.
This is a simplified approach, but it should work well enough to keep you from sticker shock when you get your tax bill.
Roger
I paid 31,000 for the property. The total repairs were 14,000 of which 10000 was mine. I understand what you are saying though. Thanks.
Tim