Posted by Amy on January 18, 2003 at 12:33:21:
Hi Tom,
Thank you very much for your detailed reply. This helped me arrive at my answer. Take care.
Capital Gains Tax on Multi-family - Posted by Amy
Posted by Amy on January 17, 2003 at 13:08:25:
Last year I sold my 2-family in which I resided in one of the units for 2 1/2 years. I bought the house for $82,500 and sold it for $173,000 I refinanced my house to consolidate debt and owed a mortgage of $110,000 at the time of the sale (not sure if this matters or not). How much capital gains tax am I looking to pay in? Any help would be appreciated, not sure what the tax laws are.
Amy
Re: Capital Gains Tax on Multi-family - Posted by Tom Bazley, CPA
Posted by Tom Bazley, CPA on January 17, 2003 at 16:00:19:
I’m assuming you were renting the other unit out. What basis did you give the other unit for depreciation purposes? Ideally, the units should have been separated based on some meaningful relationship, such as their square footage. So if you bought the property for $82,500, and the part you lived in made up 60% of the property, then you would allocate $49,500 ($82,500 x 60%) to your residence, and use the remaining $33,000 as basis for the rental unit. You would allocate the sale the same way - $103,800 ($173,000 x 60%) to your residence and $69,200 to the rental unit. Because you lived in your unit for the required 2 years, that gain is excluded from your income. You would have a gain on the sale of the rental unit, plus recapture. To make a long story short (too late now) you need to figure out how the purchase price was allocated & do the same w/ the sales price to figure your taxable gain.