|
|
08-18-2011, 05:25 PM
|
#1
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2003
Posts: 18,085
|
tax question
I will be selling my primary residence at a loss compared to my purchase price. Can I claim this as a capital loss for federal income tax purposes?
__________________
"All animals are equal, but some animals are more equal than others."
- George Orwell
Ezekiel 23:20
|
|
|
|
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!
Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!
You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!
|
08-18-2011, 05:33 PM
|
#2
|
Full time employment: Posting here.
Join Date: Nov 2008
Posts: 728
|
don't think so but talk to your CPA. A personal home has different rules, if you haven't had any business usage, I don't think you can take the loss. If, on the other hand, you had business usages, home office, home was rented, it could, but doubtfully, fall under a different category. ONLY someone very familiar with real estate tax law should answer this question. I have quite a bit of property, but I wouldn't do a thing without her checking current guidelines.
|
|
|
08-18-2011, 05:36 PM
|
#3
|
Recycles dryer sheets
Join Date: Jul 2006
Posts: 102
|
Nope. Pg 5 under Amount of Gain or Loss. http://www.irs.gov/pub/irs-pdf/p523.pdf
Stupid b/c you have to include the gain but can't take the loss.
|
|
|
08-18-2011, 06:09 PM
|
#4
|
Gone but not forgotten
Join Date: Jan 2007
Location: Sarasota,fl.
Posts: 11,447
|
My husband worked for the IRS . He inherited a house that was valued at $300,000 . It was sold for $225,000 and he claimed a loss on his taxes . This was in 1992. So I would check with an enrolled agent .
|
|
|
08-18-2011, 08:22 PM
|
#5
|
Thinks s/he gets paid by the post
Join Date: Sep 2006
Posts: 2,842
|
Absolutely not, personal losses on personal property are not deductible
__________________
But then what do I really know?
https://www.early-retirement.org/forums/f44/why-i-believe-we-are-about-to-embark-on-a-historic-bull-market-run-101268.html
|
|
|
08-18-2011, 08:58 PM
|
#6
|
Thinks s/he gets paid by the post
Join Date: Feb 2008
Location: Indialantic FL
Posts: 1,330
|
Quote:
Originally Posted by Moemg
My husband worked for the IRS . He inherited a house that was valued at $300,000 . It was sold for $225,000 and he claimed a loss on his taxes . This was in 1992. So I would check with an enrolled agent .
|
This was correct provided he did not live in the house prior to selling. He inherited an asset with FMV of 300K, he sold it for 225k, so he was entitled to taking 75k loss on the asset.
Different set of rules for selling your primary residence...very straight forward instructions, considering coming from the IRS.
__________________
JimnJana
"The four most dangerous words in investing are 'This time it's different.'" - Sir John Templeton
|
|
|
08-18-2011, 09:04 PM
|
#7
|
Administrator
Join Date: Jan 2008
Location: Chicagoland
Posts: 40,591
|
Quote:
Originally Posted by brewer12345
I will be selling my primary residence at a loss compared to my purchase price. Can I claim this as a capital loss for federal income tax purposes?
|
Sorry, but no.
|
|
|
08-18-2011, 09:36 PM
|
#8
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2006
Posts: 11,401
|
I'm glad to hear Brewer is able to sell his house!
|
|
|
08-18-2011, 10:19 PM
|
#9
|
Thinks s/he gets paid by the post
Join Date: Mar 2010
Posts: 1,994
|
Quote:
Originally Posted by Moemg
My husband worked for the IRS . He inherited a house that was valued at $300,000 . It was sold for $225,000 and he claimed a loss on his taxes . This was in 1992. So I would check with an enrolled agent .
|
If I'm not mistaken this might have fallen under "income in respect to a decedent"....and it would have allowed him a loss...because...in theory .the house was valued in the estate, the estate either paid tax on it or if the estate was under the allowable credit. limit and no tax was due...it was inherited property. ..no tax due at the time he inherited it. But because the value was listed on the estate return as $300,000 he was allowed to take the loss when it sold for less.
|
|
|
08-19-2011, 02:09 AM
|
#10
|
Recycles dryer sheets
Join Date: Sep 2008
Posts: 274
|
Quote:
Originally Posted by sheehs1
If I'm not mistaken this might have fallen under "income in respect to a decedent"....and it would have allowed him a loss...because...in theory .the house was valued in the estate, the estate either paid tax on it or if the estate was under the allowable credit. limit and no tax was due...it was inherited property. ..no tax due at the time he inherited it. But because the value was listed on the estate return as $300,000 he was allowed to take the loss when it sold for less.
|
I had a similar case where I had a house that was "underwater" (mortgage higher than current market value). What I did was to rent it out for the necessary time (1 year?) so I could claim the house as rental property. Then, when I sold the house, I claimed the house as a business loss and took the loss as a capital loss.
Not exactly the right way to do things under the Standard Rules of Accounting. I should have listed the purchase price as the fair market value when the house was converted from personal residence to income property. But I forgot that rule when I filed my taxes that year.
BTW, anybody who does not study and learn the IRS tax code and relies on an tax preparer to fill out the necessary paperwork, will loose a lot if money. Professional tax preparers, whether Accountant or bookkeeper, will always bend the rules in favor of the IRS. If you do your own taxes you can a) find a lot of loopholes and b)always claim you didn't understand the regulations.
|
|
|
08-19-2011, 02:22 AM
|
#11
|
Administrator
Join Date: Jul 2005
Location: N. Yorkshire
Posts: 34,057
|
Quote:
Originally Posted by MichaelB
Sorry, but no.
|
I agree.
You can make a gain up to $500k when selling your primary residence (filing jointly) without paying tax, so it makes sense that you can't claim tax relief on a loss.
__________________
Retired in Jan, 2010 at 55, moved to England in May 2016
Enough private pension and SS income to cover all needs
|
|
|
08-19-2011, 02:51 AM
|
#12
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Oct 2006
Posts: 7,733
|
Quote:
Originally Posted by Hobo
Not exactly the right way to do things under the Standard Rules of Accounting. I should have listed the purchase price as the fair market value when the house was converted from personal residence to income property. But I forgot that rule when I filed my taxes that year.
BTW, anybody who does not study and learn the IRS tax code and relies on an tax preparer to fill out the necessary paperwork, will loose a lot if money. Professional tax preparers, whether Accountant or bookkeeper, will always bend the rules in favor of the IRS. If you do your own taxes you can a) find a lot of loopholes and b)always claim you didn't understand the regulations.
|
Oh you mean be a tax cheat. My experience is that accountants work hard to save you money, without risking jail time.
Ignorance is really no excuse, and while the IRS is very unlikely to throw you in jail certainly they'll be happy to fine the heck out of you.
|
|
|
08-19-2011, 06:04 AM
|
#13
|
Administrator
Join Date: Jan 2008
Location: Chicagoland
Posts: 40,591
|
Quote:
Originally Posted by Hobo
I had a similar case where I had a house that was "underwater" (mortgage higher than current market value). What I did was to rent it out for the necessary time (1 year?) so I could claim the house as rental property. Then, when I sold the house, I claimed the house as a business loss and took the loss as a capital loss.
Not exactly the right way to do things under the Standard Rules of Accounting. I should have listed the purchase price as the fair market value when the house was converted from personal residence to income property. But I forgot that rule when I filed my taxes that year.
BTW, anybody who does not study and learn the IRS tax code and relies on an tax preparer to fill out the necessary paperwork, will loose a lot if money. Professional tax preparers, whether Accountant or bookkeeper, will always bend the rules in favor of the IRS. If you do your own taxes you can a) find a lot of loopholes and b)always claim you didn't understand the regulations.
|
Why not become a tax accountant yourself and help others unlawfully evade find loopholes? The IRS is forgiving to people who "don't understand the regulations". Just ask Wesley Snipes.
The accountants I've worked with were very good and I learned a great deal from them. Bragging about cheating on your taxes isn't good form. Urging others to do the same is not smart. Doing both on a public forum ... you get the message. Or at least most here will.
|
|
|
08-19-2011, 07:34 AM
|
#14
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2003
Posts: 18,085
|
Thanks, guys. Figured as much.
__________________
"All animals are equal, but some animals are more equal than others."
- George Orwell
Ezekiel 23:20
|
|
|
08-19-2011, 08:33 AM
|
#15
|
Recycles dryer sheets
Join Date: Sep 2008
Posts: 274
|
Quote:
Originally Posted by MichaelB
Why not become a tax accountant yourself and help others unlawfully evade find loopholes? The IRS is forgiving to people who "don't understand the regulations". Just ask Wesley Snipes.
The accountants I've worked with were very good and I learned a great deal from them. Bragging about cheating on your taxes isn't good form. Urging others to do the same is not smart. Doing both on a public forum ... you get the message. Or at least most here will.
|
If you were a tax preparation specialist, what call would you have made under these circumstances of a primary residence converted to a rental? What is the property's basis for tax purposes? I bet that not one citizen in ten would even know they are making a mistake.
But I agree, it is poor form to openly admit that one has knowingly made an error on one's taxes. I had a wealthy friend who got rich off real estate. One rainy April day he said, "Whenever I fine my taxes I feel like I have either paid too little or too much to the government". I have often had that feeling.
|
|
|
08-19-2011, 09:50 AM
|
#16
|
Administrator
Join Date: Jul 2005
Location: N. Yorkshire
Posts: 34,057
|
Quote:
Originally Posted by Hobo
If you were a tax preparation specialist, what call would you have made under these circumstances of a primary residence converted to a rental? What is the property's basis for tax purposes? I bet that not one citizen in ten would even know they are making a mistake.
But I agree, it is poor form to openly admit that one has knowingly made an error on one's taxes. I had a wealthy friend who got rich off real estate. One rainy April day he said, "Whenever I fine my taxes I feel like I have either paid too little or too much to the government". I have often had that feeling.
|
Years ago I remember listening to a report where they had reporters with a variety of financial situations visit many tax preparers, and a large number of returns had as many different results as there were tax accountants.
The tax code is way too complicated, imo.
__________________
Retired in Jan, 2010 at 55, moved to England in May 2016
Enough private pension and SS income to cover all needs
|
|
|
08-19-2011, 12:29 PM
|
#17
|
Thinks s/he gets paid by the post
Join Date: Sep 2006
Posts: 1,691
|
Quote:
Originally Posted by Running_Man
Absolutely not, personal losses on personal property are not deductible
|
The key word being "Personal", investment property you can.
TJ
|
|
|
08-19-2011, 12:46 PM
|
#18
|
Thinks s/he gets paid by the post
Join Date: Oct 2010
Location: Waimanalo, HI
Posts: 1,881
|
I've always done my own taxes -- not hard, since my affairs have been very simple and straightforward. But several times I made mistakes (in my favor), and the IRS just sends me a bill. I underpaid by $800 last April, and got the bill a few weeks ago, which included a $5 penalty. Big deal. The penalties for my minor errors have been so trivial that it's not worthwhile even being terribly careful filling out the return. When I started doing my mother's returns, I was not impressed with the job HRBlock had done for her in previous years.
__________________
Greg (retired in 2010 at age 68, state pension)
|
|
|
08-19-2011, 02:30 PM
|
#19
|
Recycles dryer sheets
Join Date: Sep 2008
Posts: 274
|
Quote:
Originally Posted by GregLee
I've always done my own taxes -- not hard, since my affairs have been very simple and straightforward. But several times I made mistakes (in my favor), and the IRS just sends me a bill. I underpaid by $800 last April, and got the bill a few weeks ago, which included a $5 penalty. Big deal. The penalties for my minor errors have been so trivial that it's not worthwhile even being terribly careful filling out the return. When I started doing my mother's returns, I was not impressed with the job HRBlock had done for her in previous years.
|
If the IRS just sends you a bill, it most likely means you made a math error, or perhaps filled out the wrong line on a form. Anyway, it is an error that would cause an IRS computer to pull out a tax return. Presumably it is reviewed by a human before sending you a bill and a small penalty.
If I am not mistaken, the IRS has several levels of review or audit. All returns are scanned by a computer to check for a math error. Only a very few are selected for a major audit. For the most part they will ask you to verify a certain item that you put on one of the forms. I have had that a couple of times, where my rental expenses were statistically higher than normally expected for similar properties. No problem; I keep all my receipts carefully organized. The IRS will even send you a letter saying "good job, keep up the good work". It is the detailed audit that is terribly time consuming and carries the largest penalties if the IRS finds a sizable error.
Good point with regard to H&R Block and the tax prepares at WalMart. The people who prepare returns are give a crash course in tax preparation and sent out to work. Over the years, I have looked for good accountant or bookkeeper to prepare my taxes. They certainly can be relied upon to provide good advice on certain subjects. But keeping up with the tax code and doing my tax planning accordingly saved me a bundle on taxes. I have never calculated exactly, but I bet the money saved on taxes by careful tax planning cut 5 years off my retirement age. These days, if you have a sizable income the job has been made much easier using computer programs like TurboTax®.
|
|
|
08-19-2011, 05:49 PM
|
#20
|
Thinks s/he gets paid by the post
Join Date: Oct 2008
Location: Naples
Posts: 2,179
|
Brewer12345, I had a similar situation on our 2010 tax return. We purchased a new home in Dec 2009. Had not been able to sell our old one so we rented it out in April 2010. In November, the renters decided they wanted to buy it so we sold it to them and closed on 01-01-2011, holding the mortgage ourselves. When we went to do our 2010 taxes, the CPA informed us that we would be able to claim a capital loss as we sold it for less than we paid by about $12000. Maybe if you could convert your residence to a rental for a year, then sell it, the whole picture is changed.
Actually, we sold it for at least $25000 less than we had into that house because of upgrades; however, I thought otherwise about filing an ammended return. In fact, the CPA wouldn't let us claim the entire capital loss in 2010. We have to do it $3000 per year. I didn't want to muddy the waters.
|
|
|
|
|
Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
|
|
Thread Tools |
|
Display Modes |
Linear Mode
|
Posting Rules
|
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts
HTML code is Off
|
|
|
|
» Recent Threads
|
|
|
|
|
|
|
|
|
|
|
|
|
» Quick Links
|
|
|