Subject: Follow up to a tax question
Date: Wed, 25 Feb 2004
Good Afternoon Mr. Gray,
I have a house that I purchased in October, 2002 for $242,600, which is my primary residence. The market is really hot and I would like to buy another house in another neighborhood. What taxes would I have to pay, since I have had the property less than two years? I expect to sell the home for $325,000, and the selling expenses are estimated to be $20,000.
Date: Mon, 01 Mar 2004
You haven't met the holding period requirements to claim the exclusion from sale of a principal residence and haven't given a "reasonable cause" (such as a change in employment) to qualify for a partial exclusion. It appears your gain is $325,000 - $242,600 - $20,000 = $62,400. Using the maximum rates the federal tax at 15% would be $9,360 and the California tax at 9.3% would be $5,803. By waiting a few months, you could avoid these taxes entirely.
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