Tax implications of selling home below purchase price.?

Question

What are the implications of selling a home below the price you paid for it. How can you write that off on your taxes and does it make sense to do so.

It is an investment property with current renters in there.

Its not a principal family residence.

It was a family residence at some stage though

Answer 1

You may have a gain, or you may have a loss, even if you sell the property for less than your purchase price.

Example: Purchase the home for $100,000 and eventually convert it to a rental. The basis of the rental is the original purchase price or the FMV at the time of conversion, whichever is less. Assume the basis is $100,000.

Each year you rent the property, you are allowed an amount of depreciation. Suppose you have taken (or were allowed to take) $40,000 of depreciation on the rental property. Your basis in the property is now $100,000 - $40,000 = $60,000

If you sell the property for $75,000, your gain is

$75,000 - $60,000 = $15,000

You have a gain of $15,000 even though you sold the property for less than you originally paid for it.

So, take your rental records to a tax preparer who can figure your gain or loss accurately for you. If you have a gain you will of course pay tax on the gain. If you have a loss on the sale, you may be able to deduct that loss in the year of sale, or carry it forward if necessary.

Answer 2

You cannot deduct losses on the sale of a personal residence. Such losses can only be deducted if the property is an investment property.

It follows the same concept as attempting to deduct a loss on the sale of a personal vehicle. Can't deduct that either.

Answer 3

This is a rather complex transaction that should be left to a tax professional.

Your loss or gain is calculated on the sale price less your basis less sales expenses.

The basis is calcuated by taking the cost or fair market value when you converted it to a rental plus improvements less depreciation.

You could sell it for less than you paid for it but still have a taxable gain.

Answer 4

i do no longer think of that it would be seen a modern-day. you're able to truly communicate over with a solid tax lawyer or a CPA that focuses on tax and belongings making plans. although if the IRS considers the type to be a modern-day, you may desire to declare it against your existence time present exemption, which was once around six hundred,000, yet i think of the quantity of the existence time exemption has long previous up recently.

Answer 5

You can't write that off on your taxes, sorry. A loss on a personal home, or on other personal possessions, isn't deductible.