Sub2 And Capital Gains Tax
Hello,
I talked to a FSBO about purchasing his house with a few different methods and he liked the sub2 idea. It is worth 210 and he owes only 90K. I am willing to pay him quite a bit in a sub2 deal - however the sellers concern was whether or not there is a capital gains tax on the cash I pay him to make the deal happen.
Anyone know how this would work in terms of the capital gains?
If the property has been his personal residence for 2 out of the last 5 years, he has no tax liability.
If not and he has owned less than 1 year, short term gains apply. If he has owned longer than 1 year, long term.
William Tingle
WilliamGA
Please read my article:
http://www.thecreativeinvestor.com/modules.php?name=News&file=article&sid=415
Thanks for the replies and great article. Exactly what i was looking for!
Quote:
On 2003-12-23 16:46, WilliamGA wrote:
If the property has been his personal residence for 2 out of the last 5 years, he has no tax liability.
If not and he has owned less than 1 year, short term gains apply. If he has owned longer than 1 year, long term.
William Tingle
WilliamGA
So your are really saying if the seller bought the house at say 80K lived in it for 2 yearsand he is selling it for 210K you are saying he owes NO tax?
Please advise.
Thank you.
Michael[ Edited by MrMike on Date 12/23/2003 ]
Mike,
That's right, up to 250k in gain is tax free when selling your personal residence.
Nice, isn't it.
William Tingle
WilliamGA
Is that the once in a lifetime deal? If it is wouldn't it be better to trade up if possible into a new house and keep defering using that exclusion
Good LUCK and HAPPY HOLIDAYS
Hope this helps some
Ted Jr
It is not a oncel in a lifetime deal. You may do this every 2 years if you want. You only have to live in the house 2 of the past 5 years. And the tax break is $250K for single, $500K for couple! This is a great provision if you want to buy, fix-up and live, then sell every 2 years. Though the wife may get tired of this very quickly.
Tedjr-
I think you're thinking pre-'97 (tax relief act of '97 I believe) where there was a one time capital gain tax deferment if you were 55 or older.
AND... If you can prove to the IRS that the sale of your home before 2 years is up was because of major illness or job change you very well will be able to avoid cap gains tax.
Quote:Anyone know how this would work in terms of the capital gains?
csilvestri,
If you don't believe the responses you have already received, come to the Tax Strategies Forum. There you will find quite detailed responses to this very question.
All true All true!!
Rehab and living for 2 years. rehab and live for 2 years.
if you dont mind moving and living in the mess it is a GREAT way to get a boost.
I skii with a guy that took his proceeds from 4 houses over eight years and put 100% of the money twards doun payment up along the way. he started with an 80 k house and ended up putting 300k down on a house he pqis 400k for that is worth 600k fmv and only has a 1000.00 a month payment!!!
oh by hte way a 600k house where i live will get you a 4000 squar foot house on the golf course in a gated community and the countryclub membership. needless to say the after hours partys are at his place
_________________
B.G. & Wheeler D. LLc Inc.
[ Edited by WheelerDealer on Date 12/23/2003 ]