Hi Will my mother incure taxes from selling her home to the city for $290K after owning her home for 35 years?

Question

Hello again:
Can you please tell me what taxes my 70 year old mother will incure when she sells her home to the City (through imminent domain). My mother had owned the home for over 35 years and the sell of the home is for $290,000. Will she have to pay capital gains tax? Will she get a tax concession for being over 70 years old and owning the home for close to 40 years? Will taxes also be negated because the city will purchase the home and not an actual person? What kind of real estate taxes will she have to pay? Can you please give me a website that I can reference to obtain more information about this sale? My lawyer mentioned that since the sell of the home was over $250,000 my mother may not incur taxes but he told me to seek advice from an accountant. Can you please help us thank You!

Answer 1

Under current law, she will owe no federal taxes. State and local taxes may be different.

Answer 2

The tax concessions are available to everyone regardless of age. If they meet some basic requirements, and your mother does, they can exclude the first $250,000 of gain from being taxed. You don't say what her basis is. If it's over $40,000, she wouldn't have a taxable gain. Basis is what she paid for the house originally, plus any improvements made over the years.

If her basis is under $40K then she'd pay some tax, but only on the selling price, minus the $250K exclusion, minus her basis, so she won't pay tax on much of the sale price if any, but might pay a little.

Answer 3

Assuming that she is unmarried now, there is $250,000 exclusion if you live in a home for 2 of the 5 years before the sale. In layman's terms, the first $250,000 in profit is tax free. She seems to meet this test.

What you didn't say is what she paid for the house almost 40 years ago and whether it was purchased by your father and mother and how she came to be the sole owner.

Here is the formula;

$290,000 Sale Price
??????? Less: Expenses from the sale
??????? Less: Basis in the house
($250,000) Less: Exclusion
---------------
???????? Equals Taxable Gain (if any)

That being said, you should see an CPA or EA in your local area.

Answer 4

1. You can exclude up to $250,000 of the gain on the sale of your main home if all of the following are true.
* You meet the ownership test.
* You meet the use test.
* During the 2-year period ending on the date of the sale, you did not exclude gain from the sale of another home.

Ownership and Use Tests
To claim the exclusion, you must meet the ownership and use tests. This means that during the 5-year period ending on the date of the sale, you must have: Owned the home for at least 2 years (the ownership test), and Lived in the home as your main home for at least 2 years (the use test).

If you can exclude the profit, then you don't need to report the sale. If the gain is more than the exclusion amount, report it on schedule D (Form 1040); only amount more than the exclusion amount is taxable as longterm capital gain.

Answer 5

If she has owned it alone, she will owe tax at capital gains rates on the difference between $40,000 minus her sales expenses and what she paid for it. If she owned it with someone else (and the rest of this answer speculates that this is a now deceased father) she will owe tax at capital gains rates at the difference between what it was worth $40,000 and what it was worth when your father died but not less than zero. My shoot from the him number answer is "Maybe as much as $3,000."

Answer 6

Deth, Jakes, Wayne, and Mukat are correct.

If you mother lived in the house for 2 of the last 5 years and your mother originally bought the house for at least $40,000, then there will be no federal taxes due on the sale of the house.

Answer 7

depends on what her cost basis in the property is - the first 250,000 in capital gain is tax free (net sales price after commissions - orig cost of house + major capital improvements (receipts needed) )

Answer 8

Actually, she probably will NOT have to pay capital gains taxes since it was her homestead. Please contact a CPA. But, I think I am correct.

Answer 9

In the state of Georgia no taxes will be due.

Answer 10

Thanks to the liberals, probably yes. These liberals and their Democrat henchmen are now trying to attack homeowners who stand to gain from property apppreciation.

If Hillary is elected, it could be around 100 per cent tax, where you could keep little if anything.