Do I have to pay capitol gains tax on a house I lost in foreclosure?
Question:
I lost my butt on it, I didn't gain anything.
Answer:
Great point TaxGuru... great answer too.
I'm referring to the fact that you might have depreciated the property and refinanced the property (taking cash out) over the years. You might have only paid off your liens, but still received funds in excess of your adjusted basis.
Calculating your real estate gain takes into account a number of factors. Your original purchase price could have easily been much lower than your present liens. Although you wouldn't have had to pay gains tax when taking cash out, you would have to account at the time of sale/title transfer.
I've been working on my 1031 exchange real estate site, and should complete the site by July 4th. Many of the functions are up and running.. you can calculate your capital gain here:
http://www.1031store.com/resources/1031_...
Also, the site will have a place where you can search for professionals who will be able to help you... notably accountants(1031 exchanges are about deferring capital gains).
http://www.1031store.com/experts/1031_ex...
I hope that you do not owe anything because this sounds like a tough situation. Your foreclosure expenses probably ate up an awful lot of your potential gain. You might want to also contact a real estate attorney to make sure that you are getting a fair shake.
Hope that this helps...
no you shouldnt have to pay anything if your in foreclouser.
It is possible that you might be required to pay capital gains tax on the house, but highly unlikely. Check with your accountant.
I was under the impression that you only pay capital gains on the profit made over and above the mortgage amount of a property (minus the cost of any documented improvements) sold within the first two years of purchase.
There is no tax if there is no gain.
If you lived in the home 2 out of the last five years, you would not owe any tax unless your profit was $250k for a single, $500K for a married couple.
If it was foreclosed, and the loan was purchased by an investor, you probably will not see any profit or tax obligation.
Call a realtor in your community for further clarification.
You might have to if you did not file bankrupt. Check with a local tax person.
Your gain or loss on any sale is the sales price ("amount realized") minus your cost ("adjusted basis") and the expenses of sale. Ordinarily, your cost would include the amount of the mortgage, and your sales price on a foreclosure would include only the mortgage balance if you received nothing from the sale. However, there are circumstances that could cause you to realize a gain.
Most importantly, if the house was rented, then you claimed (or should have claimed) depreciation on it. Depreciation is a deduction against rental income and reduces your adjusted basis in the house. Even if you failed to take depreciation (such as if you never reported the rental income!), any depreciation "allowable" reduces your cost basis for purposes of computing gain.
Secondly, you may have refinanced the mortgage for more than the original purchase price and taken out cash. That cash could become taxable now that the mortgage has been foreclosed and satisfied by the sale of the house, even if you received nothing at the time of sale.
There may be other circumstances as well that could lead you to recognize gain on the foreclosure. Consult a tax advisor for more information.
Wether or not you pay capitol gain tax on the sale depends on if you sold it for more than it was purchased for plus improvements and if you lived in for two out of five years you owned it and if the profit was more than the exclusion amount if this was your main home. Probably not, but what you might look out for is something called "forgiveness of debt" income reported on a 1099C Cancellation of debt. This income is taxable unless under bankruptcy or insolvent at the time the debt was forgiven.
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