Discussion:Short Sales of Rental Property
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Discussion Forum Index --> Basic Tax Questions --> Short Sales of Rental Property
Discussion Forum Index --> Tax Questions --> Short Sales of Rental Property
| 28 October 2008 | |
| We have a client that is selling a rental property.
Their cost basis is $331,700 including land and improvements and have depreciated about $52,000 which includes 2008. It is selling for $479,000 and they owe $666,000 which makes it a short sale. What ballpark amount of tax will they be paying overall (capital gain and debt forgiveness) and do they have any short sale relief? They marginal tax rates for 2007 were 10% Federal and 2% CA State | |
| 28 October 2008 | |
| David:
1) you're not asking us to do your work for you, are you? 2) calculate the gain, apply the tax rates 3) don't forget about ยง1250 unrecaptured 4) do the search for COD income If you aren't willing to do these items, then just ask your boss for the answer. | |
| 28 October 2008 | |
| He is out today and so I am looking for some assistance as I do not have the answers at my fingertips and I have a lot of 9/30 year ends that I am working on and amended returns and other items so I was hoping for some assistance. Sorry to be coming across as lazy. | |
| 28 October 2008 | |
| I'm not saying you are lazy, I am pointing you to what to look at. You will not learn if someone gives you a numerical answer. You will learn a lot if you figure out the issues and then apply the tax law to come up with your own answer. If you want, you can even post it for further discussion and we'll tell you whether you are in the ballpark or not. But most of us also need to earn a living and don't do calculations for free. Even for clients. You're taking the first step will go a long way. | |
| 28 October 2008 | |
| I appreciate that and that is really what I was looking for mostly. Of course if any additional information came across, then that would be helpful, but you are right that I need to discover it myself.
I will see what I can find from here and will post my thoughts to see if I am on the right track. | |
| 28 October 2008 | |
| Kevin sent you out on the correct path. Since this is in CA you are going to need to determine if the loan is recourse or non recourse since this affects the tax treatment. Not even going to ask if you have be pro-rating the interest into dedcutible and non-deductible since it appears cash was taken out and used for non rental improvement purposes. Also possible that AMT will rear its ugly head given the apparent large amount of income/gain. | |
| 28 October 2008 | |
| Also, since it is rental property did/will the State take any Real Estate Withholding? | |
| 28 October 2008 | |
| Sounds like full recourse debt to me. Big COD bill unless insolvency applies. | |
| 29 October 2008 | |
| Yes, unless the promissory note limits the borrower's liability. | |
