QUESTION
When selling real estate will I be taxed on what I sold the property for or what I netted?
Asked on Feb 25th, 2013 on Taxation - Oregon
More details to this question:
I sold a 4-plex for $95,000.00. My mortgage and taxes, etc. were deducted in which I netted only $27,000.00. Will I be taxed on the $95,000.00 or what I received $27,000.00?
9 ANSWERS
Chapter 7 Bankruptcy Attorney serving Lisle, IL
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Mankus & Marchan, Ltd.
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You should be taxed on the net proceeds, at the capital gain tax rate. Check with your accountant for more details.
Answered on Feb 27th, 2013 at 8:40 PM
Neither. You'll be taxed based upon your gain, which is the amount by which the total sales price ($95,000) exceeds your tax basis. Generally, your tax basis is what you paid for the property plus the cost of any improvements, less depreciation you were entitled to take.
Answered on Feb 26th, 2013 at 10:05 AM
Estate Planning Attorney serving Wilmington, DE
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Reger Rizzo & Darnall, LLP
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Only on the gain over what you paid for the property.
Answered on Feb 26th, 2013 at 10:05 AM
Appellate Attorney serving Grosse Pointe Farms, MI
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Musilli Brennan Associates, PLLC
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You will have to provide an accounting. You need to see a tax attorney or accountant.
Answered on Feb 25th, 2013 at 8:19 PM
Taxation Law Attorney serving Glendale, CA
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Irsfeld, Irsfeld & Younger LLP
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Neither. You will be taxed on your net profit. Sale price less selling expenses minus adjusted basis. Therefore, for example, if it was land, and you bought the property for $70,000 and now sold it for $95,000 less sale expenses, such as broker commission, escrow fees, recording fees, documentary transfer tax, etc., of $6,000, your profit would be $19,000 (95-6-70 = 19). Interest, property tax and mortgage principal are NOT expenses of sale. (Interest and tax is deductible as usual; mortgage principal is not deductible ()and when you borrowed the money, you did not have to pay tax on it).
Answered on Feb 25th, 2013 at 8:18 PM
Business Law Attorney serving Sacramento, CA
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Williams & Associates
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Gain on the sale of an asset is determined by the amount realized less basis and transactional costs. In this case, the amount realized is $95,000. Your basis is the amount paid for the property increased by any amounts spent to improve the property (that were not deductible expenses) less any depreciation that you have taken while you owned the property (which would reduce the cost basis) and less any transaction costs (for example the 6% real estate broker fee). With the information provided, it is not possible to calculate the gain because you have not included the cost of the property, any amounts expended to improve the property, any depreciation taken or any costs associated with the sale.
Answered on Feb 25th, 2013 at 8:18 PM
Probate Attorney serving St. Louis, MO
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Edward L. Armstrong, P.C.
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You should be taxed on net gain.
Answered on Feb 25th, 2013 at 8:17 PM
Taxation Law Attorney serving Sacramento, CA
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Rex Halverson & Associates, LLP
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The gain realized from the sale of real estate is what is taxable. A taxpayer has gain if the amount realized from the sale is more than the taxpayer's adjusted basis of the property. You will need to learn what items impacted your basis (increasing or decreasing same while you owned it). Mortgage and taxes are not relevant. Get a copy of IRS Pub. 544 to help you figure this out.
Answered on Feb 25th, 2013 at 8:17 PM
Tax Attorney serving Portland, OR
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Bullivant Houser Bailey PC
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Your taxable income will equal the gross amount less deductible expenses and then less your tax basis (adjusted cost) in the property. The principal balance of the mortgage does not affect how much taxable income you will have.
Answered on Feb 25th, 2013 at 8:17 PM