2007-09-22 12:40:11 · 7 answers · asked by jarynth 2 in Business & Finance ➔ Taxes ➔ United States
It doesn't necessarily have to be a house...it could be any kind of property sold below its value, for whatever reason.
Any suggestion will be appreciated. Thanks
2007-09-22 12:41:23 · update #1
No debt involved.
Isn't this equivalent to a $300k donation?
2007-09-22 12:54:11 · update #2
StephanieR pleasssssssssssse stay out of the tax section you do not know what you are talking about. You CAN NOT take a loss on the sale of a personal residence!
"So if you sell something, say a house, even if the realtor says its worth 400k, and you sell it for 100k it is then a house worth 100k. However, if you paid 400k for the house and then sold it for 100k, you can write off your 300k loss on your taxes."
2007-09-22 14:13:12 · answer #1 · answered by Anonymous · 1⤊ 1⤋
If the buyer was not a charity, the difference would be a gift to the buyer and not taxed to the buyer. If the difference was more than $12,000 you would have to file a gift tax return Form 709 and report the gift. This would reduce your lifetime exclusion on gift and estate taxes but would cause taxes to be paid only when your exclusion of $1 million is used up.
If you make a gift of part of the property, the basis of that part of the property which is gifted transfers to the donee. In your example, if you had property worth $400,000 and you received 1/4 cash and gifted 3/4 of the property, then the donee's basis would be the cash paid plus 3/4 of your basis.
If the buyer was a charity then you might be able to take the difference as a charitable deduction. Whether you could take the difference between the market value of the item and the payment received depends on the type of property you are donating.
In your example of a house used for personal purposes, you could take the full difference. If you were donating business property that had been depreciated, your charitable deduction would be less.
2007-09-23 06:41:03 · answer #2 · answered by ninasgramma 7 · 1⤊ 2⤋
You could only take a loss based on your tax basis in the property not its market value ONLY IF it was investment property, not your personal residence. If a house was worth $400K why would you sell it for $100K? Doesn't make sense. If the sale was a disguised gift you could incur a gift tax liability.
2007-09-22 20:28:29 · answer #3 · answered by Anonymous · 1⤊ 0⤋
The 3 most common reasons for doing this are you home gets repossessed, you sell your home to a related party or family member, and you sold it below market value to a charity.
Most of the other posters think that the home was repossessed if that was the case then any amount forgiven up to the fair market value of the home is taxable to you unless you were bankrupt or insolvent. See pub 908 bankruptcy tax guide http://www.irs.gov/pub/irs-pdf/p908.pdf and pub 523 selling your home http://www.irs.gov/pub/irs-pdf/p523.pdf
If you sold the home to a related party like a family member will have to file a gift tax return but you might not have to pay any tax. See pub 950 estate and gift taxes http://www.irs.gov/pub/irs-pdf/p950.pdf
If you sold the house to a charitable organization then you might be able to take a itemized deduction for the difference between the fair market value and the purchase price. You probably won’t be able to take the deduction all in one year because it will be limited to %50 of your adjusted gross income, but the deduction can be carried over. If you did this keep good records because you will almost surly be audited. See pub 526 charitable contributions http://www.irs.gov/pub/irs-pdf/p526.pdf
2007-09-23 01:03:48 · answer #4 · answered by Charlie & Angie G 4 · 0⤊ 0⤋
If you sell a house for 100k it is then worth 100k, the value of an object is subject to how much someone is willing to pay for it. So if you sell something, say a house, even if the realtor says its worth 400k, and you sell it for 100k it is then a house worth 100k. And if the bank forecloses on you and you owe 400k and they sell it for 100k and forgive your debt to them, then you must pay taxes on the 300k.
This was only an example, not real life. I dont see what was so wrong about my example here, I removed the part about writing off a loss, which you can on a rental that you lose money on, I looked it up. This is simple supply and demand. If noone is willing to pay 400k for something than it clearly isn't worth that much.
2007-09-22 20:23:44 · answer #5 · answered by Anonymous · 1⤊ 3⤋
You don't get taxed on a LOSS you get taxed on GAINS.
If your lendor accepts a short sale and lets you out of your debt, then the forgiven debt would indeed be taxable to you - the person for whom the debt was forgiven.
2007-09-22 19:50:00 · answer #6 · answered by Anonymous · 1⤊ 1⤋
Technically, you would have made a $300,000 gift.
A gift tax return would be require but no tax may be due.
2007-09-23 00:05:07 · answer #7 · answered by Wayne Z 7 · 0⤊ 3⤋