If a person holds a first mortgage on the sale of an investment property, then how does the State or Federal Goverment for that matter assess the capital gains rule for payment purposes? I realize the initial amount and any improvements is deducted but I'm refereing to any amounts of profit subject to the capital gain law. Thanks for any help you can provide
2006-12-27 03:36:51 · 2 answers · asked by Jim D 1 in Business & Finance ➔ Taxes ➔ United States
How much is "owed" on a property has no bearing on the capital gains calculation.
For example: Taxpayer A sells propery with basis of $20,000 for $100,000 but they owe $90,000 on the property. The would only have $10,000 in cash after closing but would owe taxes on $80,000 ($100,000 - $20,000).
2006-12-27 03:48:20 · answer #1 · answered by Wayne Z 7 · 1⤊ 0⤋
You did an installment sale so use Form 6252 to compute profit percentage. This is multiplied by note principal received each year to compute taxable gain.
2006-12-27 11:46:36 · answer #2 · answered by spicertax 5 · 0⤊ 0⤋