Does CG Apply After 1st And A 2nd Is Resolved...(m)
Would profit after both a 1st and 2nd are paid be whats taxed or any profit after the 1st only? I'm asking this because my friend has a house that has a 1st and she took a 2nd out on it also a while ago, now she plans to sell it and I'm wondering how capital gains would apply with two liens.
quinn
Unfortunately your profit is not related to your mortgages. Profit is the sales price minus the expenses of the sale minus your adjusted basis. The basis is the cost she originally paid for the house plus the cost of any improvements to the house over the years minus any accumulated depreciation or other adjustments for having sold part of the property, that sort of thing.
How'd I do dave?
Your mortgages are more-or-less independent of these things.
You are absolutely correct. The financing has nothing to do with the capital gain calculation what so ever. It is merely how you financed the acquisition of the property and has no bearing on what the actual cost of the property was.
Could you guys dumb this down for me? You guys lost me with the adjusted basis minus the other stuff stuff. I'm a little on the slow side today. Could someone give me an example using numbers? Thank you guys, I knew I could get the answers here.
quinn
I'm not an expert, but I'll try to translate for you. If she bought it for $100k. Has documentation/receipts that show she put $20k in repairs/improvements into it. Then sells for $150k, her "gain" is $30k
150 - (100+20) = 30
Financing amounts, etc., are irrelevant
oops, I meant to include other costs in there too, just take the 20k of repairs, etc., whatever that number is for her, it should include realtor commissions, legal fees associated with purchase/sale, etc. in addition to the repairs and improvements.