I am selling a cabin I have owned since 1989.?

Question

I purchased the bare land with my husband (now deceased) and
built the cabin on the land. I lived at the property for about two years, (1991-92), however my principal residence is elsewhere in
the County. I have the property mortgaged to FSA (Farm Service
Agengy-Dept of Ag) along with my farm which is my principal residence, and the entire proceeds of the sale MUST go to debt retirement. Do I have to pay gains tax on the entire selling price???? Where can I go to find out if any expenses incurred (i.e. property taxes, improvements to the parcel of land) are deductible???

Answer 1

This is a tricky one.

You would pay capital gains taxes on the difference between the sale price and the basis. The basis would include the original cost plus any improvements. The property taxes were probably deducted each year so you can not add those to the basis. You may get a "stepped-up" basis for half of the land based on the fair market value of land on the date of his death.

It is time to see a professional. I would not attempt this on your own.

Answer 2

You paid tax on the capital gain. This is the sale price less your tax basis. Your tax basis is the amount you paid for the land plus the cost of capital improvements (IE the cabin). The property taxes are deductible in the year they are paid, if you itemize. If you missed the deduction in prior years, you can filed amended returns for up to three years. The purchase price of the land should be on record where deeds are recorded in that area. Unless you kept the records, the cost on the cabin is harder to determine. It sounds like you would benefit from consulting an accountant or a tax attorney.

Edit:
I just read roger w's answer. In order to qualify for the capital gains exclusion, you must have lived in the home for 2 of the last 5 years. If I read your question correctly, this is not the case.

Answer 3

I am assuming that this has always been a second residence. You basis in the property is what you paid for the land plus improvements. Property taxes are not an improvement they would have been deductible each year you paid them. The complicating factor here is that you husband died. Again assuming you owned it jointly with him, you would receive a step-up in basis on one-half of the property at his death. Your gain or loss is measured from this basis determination. If you end up with a gain you would pay tax
I suggest that you contact a CPA to help you determine how this transaction works as it is rather complicated and you should have a good working knowledge of the rules you need to deal with.

Answer 4

First go to a tax accountant, CPA. I know only a little about this but will share, no expert, there is a capital gains exclusion $250,000 on capital gains on personal residence, double this for married couples. Your base, used in determining capital gains can be reduced by any improvements you made in property, not tax's or maintenance items but if you added airconditioning or put on a new deck.

Answer 5

Gains are taxable (sorry).