House sold 7/06 for $700K
Original purchase price $267 4/02
Improvements $106K (basis = 373,000)
Widowed 3/96 house value at the time was $390K
Question: Does this mean I have to pay taxes on 700,000- (.5X373=186,500) - (.5X390=195,000)-250,000=68,500?
Worried...Thank-you
2007-04-25 12:57:24 · 6 answers · asked by SQD 2 in Business & Finance ➔ Taxes ➔ United States
why isn't the stepped up basis included in these answers please?
2007-04-25 13:35:24 · update #1
to the persn who caught my date error, true...
it was purchased 4/92, not 4/02
thank-you
2007-04-26 07:46:21 · update #2
If she inherited her husband's half of the house, her basis is .5(373K + 390K) = 381.5K.
Her gain is 318.5K and she can exclude 250K, so she pays capital gains on 68.5K, which is what you figured. The capital gains tax comes to a bit over $10K.
2007-04-25 19:13:00 · answer #1 · answered by ninasgramma 7 · 0⤊ 1⤋
I think you have dates somewhat wrong. Your information says that the house was bought on 4/02, which is after the person became a widow, which you have as 3/96. If the house was bought after the woman became a widow, there is no step-up in basis. If the house was bought before the woman became a widow, then there would be some step-up in basis, however, the improvements would need to be split as to before becoming a widow, and after becoming a widow, since the improvements before becoming a widow should already be included in the house value of $390K. In addition, the widow would also include in her cost basis, the closing costs that were paid at the time the house was purchased, and also closing costs when the house was sold. Also, as long as she has followed the 2 out of 5 rule (living in the house as her primary residence for 2 out of the last 5 years immediately preceeding the sale of the house) she would not have to pay taxes on gains up to $250,000 on the sale of the house.
2007-04-26 06:50:23 · answer #2 · answered by Anonymous · 0⤊ 0⤋
Were you widowed 3/96 or 3/06? That would make a difference. If you were widowed 3/06, you would file Married Filing Jointly for 2006 with a $500k capital gain exclusion on the sale of the primary residence. In reading the question, it sounds as if the date would have to have been 3/06. In that scenario, the stepped-up basis is irrelevent due to the capital gain exclusion that you would have with the Married Filing Jointly status. I come up with a capital gain of $327k, without considering the stepped-up basis.
2007-04-25 16:16:23 · answer #3 · answered by Rene F 2 · 0⤊ 0⤋
you would pay taxes on 77,000. 700k minus original cost and up keep, 373,000 equals 327,000 minus 250,000 that's tax free equals 77,000.
2007-04-25 13:05:41 · answer #4 · answered by george 2 6 · 1⤊ 0⤋
Your math is correct.
Original purchase price: $267K (your half is $133.5K)
Improvements: $106K (your half is $53K)
FMV on date of spouse's death: $390K ( your half is $195K)
Your basis is 133.5K+53K+195K= 381.5K
Your gain would be: 700K-381.5K = 318.5K
Your taxable gain would be: 318.5K - 250K = 68.5K
Stepped up basis is included in this calculation.
2007-04-25 19:00:07 · answer #5 · answered by Mark S 5 · 0⤊ 0⤋
just like George says, you'd pay tax on $77,000.
2007-04-25 13:29:25 · answer #6 · answered by Jo Blo 6 · 0⤊ 0⤋