Taxpayers are usually terrified of the word “capital gains.” You can define capital gains as the profits you gain from the sale of an asset. As per capital gains tax law, you have to pay taxes on the profits you make when you sell an asset. You can make a capital gain on assets such as land, stocks, or bonds. On the other hand, if you made a loss on a piece of property, it is considered to be a capital loss for which you get a tax deduction.
A clause in the capital gains tax law permits you to avoid paying capital gains tax even if you make a huge profit while selling an asset. Real estate in one area in which you can dodge capital gains tax. Real estate is known to be a very profitable venture; its price never goes down as long as you own it. The good news is that IRS has enabled tax payers, who invest in real estate, to avoid paying taxes on the profits they make on it.
As per capital gains tax law, if you are single and make a profit of less than $250,000 or if you are married and make a profit of less than $500,000 on the sale of your primary residence, you don’t have to pay any capital gains tax. So, unless you make a really big profit while selling your residence, capital gains tax is not something you have to worry about. Even if you make a profit exceeding $250,000 or $500,000, you have to pay taxes only on the amount which exceeds that.
If you would like to sell a house that you have been renting, you will be interested to know that you can consider it to be your primary residence, provided you live in it at least two years during a span of five years before you sell it. Several people who invest in real estate use this convenient clause to escape capital gains tax. All they have to do is to live in the property they have been renting for two years just before selling it.
Capital gains tax law has yet another clause that can help you avoid paying taxes on profits made on a place you have been renting even if you don’t live in it for two years. You simply have to invest your profits in more real estate property, and you can escape paying capital gains taxes.
You have to pay taxes on profits made out of selling bonds. If you have held the stock for five or more years, you have to pay a 15 percent capital gains tax . However, if you have held it for less than five years, you have to pay almost double, that is 30 percent.
Your tax professional is the best person to answer any queries you might have on capital gains tax law.
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#1 by WPMixer on July 24th, 2010
Either Obama is a lowgrade moron OR is purposely destroying our economy, in the face of facts about capital gains. You decide.
#2 by Simian on July 24th, 2010
You are rattling all kind of schemes in your brain. This could get you in big trouble, penalties, even prison.
A gift is transferred at Fair Market Value on the date of the gift. For real property, this involves an appraisal by a qualified appraiser.
Captal gain is then paid by the donor on the difference between the FMV on the date of gifting and the FMV on the date the property was bought or you ceased to use it as your principal residence.
If the property is sold below market value at non-arms length (i.e. to a relative), this triggers cap gain based on FMV anyway.
If the condo was _NEVER_ your principal residence, there is no "exemption".
If you designated your condo as your principal residence for at least one year, a second year is granted in the calculation of total cap gain.
See: http://www.cra-arc.gc.ca/E/pbg/tf/t2091_ind/README.html
and http://www.cra-arc.gc.ca/E/pbg/tf/t2091_ind_-ws/README.html for the calculation.
#3 by T S on July 24th, 2010
If you are actively looking for loopholes then it is perceived as tax evasion.
The simplest way to make this go away is for your grandmother to rescind the gift. This might be too complicated depending on what the granddaughter has done with the property.
If this is impossible, under the Voluntary Disclosures Program, linked below, your grandmother can correct the information on the return, and pay any capital gain taxes due plus interest, but without penalties or prosecution.
There are also Taxpayer Relief Provisions, under which penalties and interest can be waived under certain circumstances (severe illness, mental incapacity, death), linked below.
Consult a tax lawyer, not an accountant, on how to calculate the cost basis of the house to your grandmother, Valuation Day Value Elections, and the market value on the date she gifted the house, both of which will significantly have an impact on the capital gains tax due.
#4 by GREAT_AMERICAN on July 24th, 2010
I equate her beliefs to Big Brother 1984 beware of that Billary Clinton!
#5 by Wordpress on July 24th, 2010
@andywclark the voters only wanted him to be the first black prez i voted for mccain
#6 by Anonymous on July 25th, 2010
conti. Obama is doint the EXACT SAME as Bush did before him but much much bigger. It didnt work for Bush and its not gonna work for Obama. These policies have always lead to a default, and nations dont default like you or I they inflate the currency. Which is print billions like Zimbanwe did. To pay off Americas debt you need at the very least the dollar to be devalued a 3rd, but thats only a part time solution. Itll happen again and again unless the books are balanced!
#7 by shaz on July 25th, 2010
That's because the subject is so complex. If your parents transfer the house to you, they have to live for seven years to escape the value of the house being taken back into the estate for inheritance tax calculation. Also, they would have to pay you a market-value rent if they wanted to carry on living there. You have to watch the situation being "a deed with reservation".
Not likely Capital Gains would apply if house will be your main residence. Capital Gains liability only arises when a property that is not your main residence is sold at a profit. Say when anything happens to your parents, you want to sell house, if their part, which perhaps you would let for a while, and you make a profit from the estimated value on their death, that may be liable. Also, if that house is not their main residence, on transfer to you, they may be liable to Capital Gains Tax, even if no money changes hands.
I think you need to see a financial advisor. Not one of these anybodies who set up with a very basic knowledge, but a specialist in financial planning, with a view to setting up a trust.
#8 by Anonymous on July 25th, 2010
@alexedit1 Bush didnt walk into a surplus. Clinton ROBBED Social Seacurity and medicare to create a surplus. SS now takes in less money than its handing out. Plus Greenspan under Clinton caused a Tech bubble by lowering interest rates and flooding the system with cheap credit. It collapsed when Bush came into power plus 9/11 so he did the same. Low interest rates was cheap money for houses plus “stimulus” spending raised GDP figures even though that was borrowed money from China. (continued)
#9 by Free Blog on July 25th, 2010
How the hell did this guy win the election?
#10 by Blogger on July 25th, 2010
I’m laughing so hard…let’s see “You can’t use China as a credit card”….yeaaaaahh OK Mr. President. “Pay as you go” loll lol lol lol lol.
Pure comedy
#11 by Anonymous on July 26th, 2010
@fiatalfa1 Ironically european leaders are the deficit hawks right now. Germany (3% budget deficit in 2009) passed a constitutional amendment requiring a balanced budget from 2016. Liberals would be dismayed at how pro-corporate is Europe. The top tax rates on corporate income are 10-15 points lower than in America; specially lower in Scandinavia and Switzerland. To sustain the Welfare State in Europe, 3/4 of tax revenue come from labor and consumption and 1/4 from capital and corporations.
#12 by WPBlog Shop on July 26th, 2010
New Obama Video.
watch?v=EPyKUuyK_sM
#13 by I love Obama 3 on July 27th, 2010
First off to Doc Watson… wall street responded to Obama by going down down down. It is still nowhere near where it was. A small surge was created by big investors wanting catch prices while low in advance.
Now to the question. They do not understand economics. Thats the bottom line
CEOs and boards look to the future. Their obligation is to see what is going to happen. When we have a person who is leading by a large margin in the polls who is promising to raise taxxes on everything.. they take notice and prepare
Noone wants to be the deer staring at the incoming headlights.
They see astronomical tax surges? They start laying off and reducing their overhead costs.
Stock investors pull their money out NOW.. why? raising capitol gains tax to 30% will kill any possibile earnings. Many investors see it as suicide keeping their money invested when they will be hard pressed to make up for the costs.
So Obama being president elect HAS killed our economy.
Does the avregae person understand this? NO but most of them couldnt make it in the global business world anyways.
All they care is they get their slice.. but a big slice of a nonexistant pie.. is still nothing
#14 by Anonymous on July 27th, 2010
For purposes of fairness? Are you serious…despite the fact that it may be WORSE for the economy and government revenue, but you want to do it because you don’t think it’s fair people are making money? If you want a ‘FAIR’ tax system, how about abolishing capital gains and income tax altogether, and replacing everything with a sales tax. Tax people based on how much they SPEND, not how much they earn. Since rich people spend more money anyway, they’ll end up paying more, THAT would be fair.