Subject: capital gain
Date: Sat, 26 Jun 2004
I had a property quick-claim deeded to me. I made payments on the mortgage, which the sellers kept in their names. After living in the home for 13 months, I am going to sell it. I don't want to commute more than an hour each way anymore. Do I owe tax on the profit, which will be $90,000 less selling costs and the down payment on a new purchase?
Date: Fri, 2 Jul 2004
Yes. The capital gain should qualify for the 15% maximum federal rate. The down payment for a new purchase does not reduce your taxable gain. Most states, including California, give you no tax break for long-term capital gains, so the gain may be taxable at the same rate as other income on your state income tax return. If you could hold out until you've lived in the home for more than two years, you can avoid the tax entirely.
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