"First of all, the sale is subject to capital gains tax on the
property's appreciation. If the property has been your main home for
at least two of the past five years, you can exclude up to $250,000 of
gain ($500,000 for married couples). However, this opportunity to
avoid capital gains tax doesn't apply if the property is a vacation
home, land or any real estate other than your primary residence."
"Gifts of Real Estate" Virginia Commonwealth University Foundation
(December 13, 2004) http://www.wpg.cc/stl/CDA/articleDetail/1,1001,907-435,00.html
"Land and improvements, such as buildings and other permanent
structures and their components, are real property, not personal
property and do not qualify as section 179 property. Land
improvements include swimming pools, paved parking areas, wharves,
docs, bridges, and fences." "Publication 946 How To Depreciate
Property" Internal Revenue Service (2004) page 16
http://www.irs.gov/pub/irs-pdf/p946.pdf. Therefore, you cannot
appreciate your property.
"A gain is the amount you realize from a sale or exchange of property
that is more than its adjusted basis. A loss as the adjusted basis of
the property that is more than the amount you realize."
"The adjusted basis of property is your original cost or other basis
plus certain additions and minus certain deductions, such as
depreciation and casualty losses. See Adjusted Basis in Publication
551. In determining gain or loss, the costs of transferring property
to a new owner, such as selling expenses, are added to the adjusted
basis of the property."
"The amount you realize from a sale or exchange is the total of all
money received plus the fair market value of all property or services
you receive. Unite you realize also includes any of your liabilities
that were assumed by the buyer and the liabilities to which the
property transferred is subject, such as real estate taxes or a
mortgage."
"Publication 544 Sales and Other Dispositions of Assets" Internal
Revenue Service (2004) page 3 http://www.irs.gov/pub/irs-pdf/p544.pdf
It appears that your long-term capital gain would be subject to a
federal capital gains tax rate of 20% and a Virginia capital gains tax
of 5.75%.
"Elder Law News" Oast & Hook, P.C. (October 27, 2000)
http://www.oasthook.com/eln00/newsltr43.pdf
Sincerely,
Wonko |