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Capital gains on sale of 2nd home
02-21-2020, 03:10 PM
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#1
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Moderator Emeritus
Join Date: Aug 2007
Location: Northern Illinois
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Capital gains on sale of 2nd home
DW wants me to round up my tax info and get it to the cpa Monday. We sold our snowbird condo in 2019, and I anticipate paying tax on the capital gain.
I’m just starting to research this, and it’s been almost 30 years since I sold a house that wasn’t our primary residence.
I assume that closing costs and realtors fees are subtracted from the gross gain to get to the net gain.
But what else can be subtracted? I assume the cost of improvements such as carpeting, hardwood floors, plantation shutters? can be subtracted. We also bought new appliances that were sold with the condo. Wondering if the cost of these could be subtracted from the gain as well.
Anyone have any other ideas? I just don’t want to go talk to the cpa unprepared.
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02-21-2020, 04:48 PM
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#2
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2014
Location: Spending the Kids Inheritance and living in Chicago
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I believe all the improvements and the new appliances add to your basis (so less profit). And the closing costs and realtor fees are subtracted from the sale, so again less profit.
Did you rent the place ?
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Fortune favors the prepared mind. ... Louis Pasteur
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02-21-2020, 04:54 PM
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#3
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Administrator
Join Date: Jan 2008
Location: Chicagoland
Posts: 40,518
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Quote:
Originally Posted by Ronstar
But what else can be subtracted? I assume the cost of improvements such as carpeting, hardwood floors, plantation shutters? can be subtracted.
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Yes to these
Quote:
Originally Posted by Ronstar
We also bought new appliances that were sold with the condo. Wondering if the cost of these could be subtracted from the gain as well.
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Sorry, appliances are not considered capital improvements and don't add to the cost basis.
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02-21-2020, 05:02 PM
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#4
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Moderator Emeritus
Join Date: Aug 2007
Location: Northern Illinois
Posts: 16,543
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Quote:
Originally Posted by Sunset
I believe all the improvements and the new appliances add to your basis (so less profit). And the closing costs and realtor fees are subtracted from the sale, so again less profit.
Did you rent the place ?
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Nope - never rented the place
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02-21-2020, 05:20 PM
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#5
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
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Quote:
Originally Posted by MichaelB
....
Sorry, appliances are not considered capital improvements and don't add to the cost basis.
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I had to look it up, and you are correct. Unless they are built in appliances.
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Fortune favors the prepared mind. ... Louis Pasteur
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02-21-2020, 05:23 PM
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#6
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Thinks s/he gets paid by the post
Join Date: Apr 2008
Posts: 1,991
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Quote:
Originally Posted by MichaelB
Sorry, appliances are not considered capital improvements and don't add to the cost basis.
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Not even built-in appliances (in-wall ovens or dishwashers, countertop stoves)?
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02-21-2020, 10:24 PM
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#7
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
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Quote:
Originally Posted by MichaelB
... Sorry, appliances are not considered capital improvements and don't add to the cost basis.
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I think it depends. In many markets, the sales price includes not only the land and building, but also certain appliances that will stay and they are frequently spelled out in detail in the listing and in the purchase and sales contract. If appliances are included in the sales contract (and therefore in the sales price) then IMO the cost of the appliances included in the sale can also be included in calculating the gain.
While they are not part of the basis of the home, they are part of the basis of what was sold.
ETA: Technically, I think you are supposed to exclude the amount received for personal property, which would include appliances that are not built-in and report those sales on Schedule D. In my experience, it is difficult to do that because the amount of the sale price relating to appliances is usually not bifurcated in the sales contract. Accordingly, the most practical approach is to simply include the cost of appliances in basis rather than make some sort of arbitrary allocation of purchase price. For a second home, the net impact woud be the same since capital gains on the house sale and on personal property sales would both be subject to capital gains rates. I woudll much rather defend including the cost of appliances in basis than defend some arbitrary allocation of the sale price between real and personal property.
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02-21-2020, 10:29 PM
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#8
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,204
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Quote:
Originally Posted by statsman
Not even built-in appliances (in-wall ovens or dishwashers, countertop stoves)?
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Built-in applances are specifically includable. Publication 523, page 9. https://www.irs.gov/pub/irs-pdf/p523.pdf
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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02-22-2020, 04:06 AM
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#9
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Full time employment: Posting here.
Join Date: Mar 2011
Location: Mpls
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Ronstar,
Thanks for your post. I'm in the process of buying my first second home (a snowbird townhome in Florida), and I never even thought about the tax rules when it comes time to sell.
I will start keeping track of improvements.
Have no plans to rent it.
Are you willing to comment on why you are selling? As a rookie, I'm hoping this is a good move for me.
Take care, JP
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02-22-2020, 11:07 AM
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#10
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Moderator Emeritus
Join Date: Aug 2007
Location: Northern Illinois
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Quote:
Originally Posted by JP.mpls
Ronstar,
Thanks for your post. I'm in the process of buying my first second home (a snowbird townhome in Florida), and I never even thought about the tax rules when it comes time to sell.
I will start keeping track of improvements.
Have no plans to rent it.
Are you willing to comment on why you are selling? As a rookie, I'm hoping this is a good move for me.
Take care, JP
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We sold because we intended to move to Arizona full time, and we were looking for a bigger place. Our snowbird condo only had a one car garage, and we also needed to climb stairs to get to our living space.
But family issues have since interfered, and we are grounded in Illinois for a while.
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