capitol gains ??

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Old 04-28-08, 04:44 PM
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capitol gains ??

Bought my first home in Nov of 2004. I lived in this home up until May of 2007.

Currently that home is being leased and the lessee wants to lease for another year. IF she leases for a year and is not able to buy this time next year...........

I am worried I will be foreced to put it back on the market and if I do not sell it by Nov of 2009 and do finally sell it after that date I will have to pay capitol gains.....Correct?????????
 
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Old 04-28-08, 09:35 PM
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The rule on waiver of capital gains is you must have lived in the house for TWO OF THE LAST FIVE YEARS. So, if you moved out in MAY OF 2007, the November means nothing, but as of May of 2010, you would have lived there for two of the last 5 years.

Those years would have been; May 2005-May 2007. The years May 2007-May 2010 would have been the three years that you did NOT live there.

However, the fact that you now have 2 years shouldn't give you much comfort. The clock is ticking. I'd get a FIRM CONTRACT to sell it or start looking for someone else. You're in the prime selling season RIGHT NOW, and lots of parts of the country have picked up lately.

However, even if you don't qualify under section 121 (2/5 years) how much would your NET gain be? Federal tax on that is only 15%, plus whatever your state hits you.

frank
 
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Old 04-29-08, 05:48 AM
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Thanks Frank.

My net gain is about $15,000 or less.

I couldn't comprehend the 2/5 year rule for the life of me.

I really want to put it back on the market now but the husband says b/c she paid rent on time blah blah blah that we should giver her another try. I complained like a typical women that two failed attempts to get loans more than likely means a 3rd failed attempt.

In the meant time.... I am/was making some decent extra money and had some really good write offs.

Now that I know I have till 2010 before I pay cap/gains I feel better about that. I honestly think I'll just give her another shot. This lease will state that is she cannot get lending by the end of Feb 2009 and close by the end of May 2009 that the property will be placed back on the market.

I was considering giving her the option to stay at a discounted rental rate until the home sells. (That is of course everything goes find w/ her paying rent on time and being a good renter as she has been). That amount wouldn't be stated but I am still trying to decide if thats a good idea to put into the agreement right now or just wait till the time comes.

I am certain she won't be able to buy......but I can wait another year. Homes are NOT selling here. Over saturated market and ppl can't get loans.

I know several ppl w/ homes on the market. They are seeing very little foot traffic.....even at open houses. The price of these homes range from $115K up to $369K. Both of them are at bargin prices!
 
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Old 04-29-08, 01:01 PM
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I was considering giving her the option to stay at a discounted rental rate until the home sells.
NO NO NO. In that situation she has a disincentive for it to sell. Which means she'll keep it looking just bad enough to turn off potential buyers. Instead offer her a REBATE or some cash toward moving if she'll keep it "showroom" ready and be very cooperative with the RE agents.

Good luck

frank
 
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