Answers to tax questions about new real estate tax laws, investments, home ownership and more! For our answers to new questions from our visitors, subscribe to Michael Gray, CPA's Real Estate Tax Letter.

Real Estate Investments

• How do you report K-1 real estate rental income from an LLC?
• Has there been any change to the passive activity loss rules?
• How does California calculate the gain on the dispostion of rental property?
• Can I claim a primary residence exclusion for an apartment if I rent others connected to it?
• Can I avoid California taxes with a Delaware LLC?
• Will the Debt Forgiveness Act of 2007 apply to me?
• What are the state tax implications of selling my vacation home?
• Can a loss on one house offset the gain on another?
• Can I live in California and have a Delaware LLC?
• Will California tax a Delaware-based LLC?
• How do I figure my tax if I sell my rental property?
• What are the tax planning strategies for selling an investment property?
• Can I get a tax break for improvements to a rental?
• Must I report capital gains on a real estate sale in a foreign country?
• What happens if only one member of a partnership lives in a house purchased jointly?
• What are the capital gains exemptions for house sales?
• Should we buy property under a corporation?
• How do I buy real estate under a corporation?
• Do I have to pay capital gains in two states?
• Can I use tax advantages even if I haven't yet rented my property?
• Should there be withholding when I sell a rental home?
• Could waiting to sell real estate for tax reasons cost you money?
• When do I deduct expenses to fix and maintain a property?
• If I don't claim depreciation, is the tax basis of the property still reduced?
• Is residential accumulated depreciation taxed as ordinary income?
• Can taxes on installment sale income be mitigated?
• Will we be taxed on the sale of our rental home?
• How can I avoid being taxed on the sale of my home?
• Is my house a rental even if I don't charge rent?
• What are the tax advantages to selling income rental property to a family member?
• What tax is due when a parent quit claims a property to their child?
• Am I being double taxed for the sale of my vacation home?
• Do I have to file a tax return for my California rental property?
• What are the tax implications of renting our home?
• Are points tax deductable for commercial real estate?
• How can we deduct mortgage interest or property taxes on a rental property?
• What capital gains laws are there on rental properties?
• Can I transfer a real estate deal to a tax-deferred annuity?
• Can I execute a "Quit Claim Deed" to transfer my rental to pass on my tax liability?
• Will my tax-deferred exchange still be valid if I move in?
• What are the tax implications of selling a rental home?
• If two people own a property, can one sell and one exchange?
• Can I still apply the principle residence exclusion if I rent my home?
• Is interest income on property sales taxable if I move to Nevada?
• What are the procedures for stepped up value on real estate?
• How should I figure capital gains on real estate?
• Can I do a tax-deferred real estate exchange?
• How do installment sales work?

1031 Exchanges

• Must I report a 1031 exchange?
• Can we make a 1031 exchange if we contract to buy before selling?
• How do I calculate capital gains for the sale of a residence converted from a 1031 exchange?
• If I sell investment property for less than the adjusted basis, do I owe capital gains?
• Do I have to sell before I can buy replacement property?
• Can I exchange a rental property for my primary residence?
• Can I move into a 1031 exchanged property that was never rented?
• Can I rent a property from my husband to complete a 1031 exchange?
• How do I designate residential realty for a 1031 exchange?
• What must I charge for rent to make a 1031 exchange?
• Can my Dad 1031 exchange a house inherited from his parents?
• How soon can I convert a 1031 replacement property into my primary residence?
• Do aliens qualify to make 1031 exchanges?
• Can I do a 1031 trade for a just-constructed property to be used for rental purposes?
• Can I exchange a primary residence for rental property?
• Can a limited partner in a building use an exchange?

Estate Planning

• Will we have to pay capital gains taxes on a property sold after probate?
• Can I claim a loss on inherited property?
• If I inherit fully depreciated property, what is the fair market value on the date of death?
• Can I apply the two-year rule to an inherited property?
• What is the tax basis of rented inherited property?
• Can I claim a loss on inherited property?
• What is stepped up value?
• How should I report income from the sale of inherited property?
• What happens if your home is placed into a living trust?

Primary Residence

• Sale of principal residence questions.
• What taxes do I need to pay when I sell my house?
• Do I have to pay federal sales tax when I sell my house?
• Is a mortgage on our rental house tax deductible?
• Can I use a construction loan for the First-Time Homebuyer Credit?
• Will the interest for my increased mortgage on my principal residence be deductible for AMT?
• Can I use the principal residence exclusion for two houses simultaneously?
• Are expenses for moving to change jobs tax deductible?
• How long do I have to report the capital gains after I sell my home?
• Can I defer gain on my home sale by buying a more expensive home?
• Can I deduct interest I haven't paid?
• Can seniors get a tax break on their real estate?
• Do seniors get a break on their real estate taxes?
• Can I take money from my IRA to pay home building costs?
• How can my parents avoid paying taxes when they sell their house?
• Does undeveloped property count as my primary residence?
• Will there be a tax consequence of giving part of my house?
• How is "primary residence" determined?
• Are losses on a home purchase deductible?
• Does my mother need to pay taxes on the sale of her home?
• Does it make a difference tax difference what state I live in?
• Can I take money out of my IRA to buy a new home?
• How can my parents avoid taxes on the sale of their home?
• What are the negatives in selling a house in under a year?
• In what year are property tax payments deductible?
• Can I avoid tax on my home sale by buying a new one?
• Do I owe tax on the profit of a house I lived in for 13 months?
• Will the state return money withheld from the sale of my home?
• How are home sale gains exceeding $250,000 taxed?
• How much should I reserve for taxes on my home sale?
• How can I reduce the taxable income from selling my house?
• Can I avoid taxes on the sale of my house by buying a new home?
• Will I have to pay capital gains on my townhouse?
• Will I owe taxes on the sale of my house in California?
• How can I avoid paying taxes when I sell my house?
• Should we convert our condo to a rental?
• Can I deduct mortgage interest on my girlfriend's house?
• What is the definition of a "Primary Residence"?
• Will my wages be subject to California tax when I move?
• How does short and long term capital gains work with real estate?
• Should my property tax bill have doubled?
• Will California forcibly withhold 3 1/3% from the sale of our home?
• Will I owe capital gains taxes when I sell my condo?
• Can we claim a deduction for points paid to refinance our home?
• Can I deduct points for refinancing my principal residence?
• How are points relating to refinancing accounted for?
• Can I deduct interest on my home construction loan?
• Can I deduct interest I pay before construction?
• Can I deduct the loss of trees on my property?
• What expenses can I deduct from purchasing my first home?
• Are home proceeds treated differently for out-of-state owners?
• Are sales taxes on building materials deductible?
• Can I 1031 exchange a condo and move into the replacement property?
• Is there a tax consequence for making a 1031 exchange replacement property my primary residence?
• Can we exchange our rentals for a home, then rent it to our son?
• Can tax deferred exchange money be transferred to a residence?
• What happens when a residence is exchanged?
• Are there new rules for the primary residence tax exclusion?
• Is the interest on a home improvement loan deductible?
• What qualifies as deductible mortgage interest?
• Are the moving expenses I was reimbursed treated as income?
• Can I deduct my moving expenses?
• Can a single person meet an exception to the rules for time to live in a principal residence if he or she develops a disability and needs to sell the home?

Capital Gains Exclusions

• Do resident aliens qualify for the home capital gains exclusion?
• Can I avoid taxes on my residence without living there two years?
• Will I have to pay capital gains on my recent principal residence if I moved three years ago?
• Will we have to pay capital gains if we sell our house?
• What happens if we sell our home before living there 2 years?
• Is there a penalty for selling a home in less than 2 years?
• Will my Mom need to pay capital gains on her house sale?
• If my Mom sells her house, can she claim my deceased Dad's deduction?
• Should I add my son's name to my home's title for a better exemption?
• Will I have to report a capital gain for selling my residence?
• Can I apply time rented to the capital gains exemption for selling a principal residence?
• Can I get a capital gains exemption for selling a principal residence even if I'm not a US citizen or permanent resident?
• What happens if I sell my residence after 5 months?
• Can I claim an exclusion for a home sale if I lose my job?
• What are the rules for capital gains on primary residence sales?
• Will capital gains taxes on residences be rescinded for a year?
• What capital gains tax will we have to pay if we sell our home?
• Is there a one-time capital gains exemption for seniors' real estate sales in CA?
• Can I partially exclude home sale gain since I lost my job?
• If you are close enough to 2 years, can you prorate the exemption on a home sale?
• What taxes must a widower pay on the sale of his home?
• Can I get an exclusion on the sale of my home if I move for my job?
• What taxes must I pay if I sell my home within 2 years?
• Will I qualify for the real estate exclusion if I sell a few days early?
• Can I choose which residence to claim an exemption for?
• Can I use the home sale exclusion for my rental property if I move there?
• Are there exceptions to the residence rule for a home sale exemption?
• Does the $250,000/$500,000 exclusion apply to my second home?
• Is there any change in the 24 months occupancy rule for selling a primary residence?
• Is getting married an unforeseen circumstance?
• Is buying a new home for a crippled guest an unforeseen circumstance?
• Can we get an exclusion on a home we could never move into?
• Can a property we've rented out qualify for capital gains exclusion?

Individual

• What is "tax basis"?
• What is the tax basis of a real estate gift?
• Is interest on second home mortgages deductible?
• Sale of principal residence questions.
• Does it matter if a house title is community property or joint tenants?
• Does my ex-husband get a tax break when I sell our house?
• Is interest deductible for my equity loan?
• Can I qualify for the exclusion of gain from the sale of a residence if my parents live there?
• Can I make a Section 1031 exchange for homes in Puerto Rico for homes in California?
• Does the 2-year rule apply when my Mom has Alzheimers?
• What exchange rate do I use to convert money earned on a foreign residence?
• Do I have to pay taxes on a property my parents gave me?
• How do I account for a sale of foreign property?
• Can I avoid or reduce capital gains on the sale of my summer home?
• What are my tax liabilities for selling my vacation home?
• How can we avoid tax liability for selling a home we have rented?
• Can I include my home in India as my vacation home on US tax returns?
• How can I show my margin loan isn't for my house?
• What happens if I use my IRA to pay for my ex's half of the house?
• If I remarry, will my new husband have ownership rights in my house?
• How will I be taxed on the residence interest my mother gave me?
• Are all properties acquired after marriage community property?
• How can I get the fair market value of 4 years ago?
• How will property without a residence be taxed?
• How will land sold adjoining my home be taxed?
• How must I handle proceeds from an inherited property?
• Will my Mom have to pay income taxes if we buy her portion of our house?

Foreclosures and Short Sales

• How can I tell if my loan is recourse or non-recourse?
• What taxes do I have to pay on a short sale?
• How do selling expenses figure in foreclosures and short sales?
• Are real estate taxes deducted at the short sale closing?
• Do I need to report forgiveness of debt for my short sale?
• Do I need to pay tax on debt forgiveness?
• Will cancelled short sale debt be taxable income?
• Does a new California law change tax consequences of a short sale?
• Does property have to be a primary residence to qualify for exclusion of cancellation of indebtedness?
• Can a rental qualify for relief from debt cancellation?
• When does California conformity to the exclusion of cancellation of indebtedness expire?
• How are investors affected by short sales and foreclosures?
• Can you clarify basis adjustmenting as relating to short sales and foreclosures?
• Can I use my investment property losses to offset cancellation of debt income?
• How are second mortgages handled for cancellation of debt?
• Can non-recourse debt be higher than the purchase price of a house?
• How is a deed in lieu of foreclosure treated?
• Help relating to "short sales" with non-recourse mortgages.

Other Answers

• General Tax Frequently Asked Questions
• Business Improvement Frequently Asked Questions
• Employee Stock Option Frequently Asked Questions

Do You Have a Question Regarding Taxes or Investments?

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