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Tax Treatment on Real Estate Loss: Sale of Lot
07-09-2020, 05:49 PM
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#1
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Full time employment: Posting here.
Join Date: Dec 2012
Location: Chandler, AZ
Posts: 735
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Tax Treatment on Real Estate Loss: Sale of Lot
Hi,
DW and I purchased an unimproved lot back in the boom days of real estate. Our thinking was either to use it as in investment or possibly build a retirement home on it one day.
Neither of those panned out, and we sold it last month at a significant loss.
What are we allowed to recover, if any, of the loss when filing our 2020 taxes?
Thanks.
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07-09-2020, 06:45 PM
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#2
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Thinks s/he gets paid by the post
Join Date: Dec 2015
Location: Santa Paula
Posts: 4,067
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I am not a CPA, but unless there was a business or rental involved, you cannot deduct the loss.
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07-09-2020, 06:49 PM
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#3
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Thinks s/he gets paid by the post
Join Date: Dec 2014
Location: St. Charles
Posts: 3,891
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Quote:
Originally Posted by Souschef
I am not a CPA, but unless there was a business or rental involved, you cannot deduct the loss.
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I am not sure that is true. I inherited some property, sold it at a loss from the day of death value, and took a deduction as a capital loss. Maybe I was wrong, and it never got caught? Turbotax seemed to think it was OK.
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07-09-2020, 06:50 PM
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#4
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2016
Location: Colorado
Posts: 8,971
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I pretty sure personal RE property losses cannot be deducted.
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07-09-2020, 06:54 PM
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#5
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Full time employment: Posting here.
Join Date: Dec 2012
Location: Chandler, AZ
Posts: 735
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Quote:
Originally Posted by Souschef
I am not a CPA, but unless there was a business or rental involved, you cannot deduct the loss.
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No business, no rental.
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07-09-2020, 06:59 PM
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#6
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Thinks s/he gets paid by the post
Join Date: Feb 2012
Posts: 1,466
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Quote:
Originally Posted by CardsFan
I am not sure that is true. I inherited some property, sold it at a loss from the day of death value, and took a deduction as a capital loss. Maybe I was wrong, and it never got caught? Turbotax seemed to think it was OK.
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We also inherited some property and were expecting a loss which our CPA told us would be a capital loss deduction. I don't know if this applies to OP's situation.
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07-09-2020, 07:25 PM
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#7
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Full time employment: Posting here.
Join Date: Dec 2003
Location: San Carlos, CA
Posts: 633
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I certainly had to pay tax on a capital gain resulting from an unimproved lot.
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07-09-2020, 07:37 PM
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#8
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Thinks s/he gets paid by the post
Join Date: Mar 2013
Location: Coronado
Posts: 3,655
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Quote:
Originally Posted by Trooper
Hi,
DW and I purchased an unimproved lot back in the boom days of real estate. Our thinking was either to use it as in investment or possibly build a retirement home on it one day.
Neither of those panned out, and we sold it last month at a significant loss.
What are we allowed to recover, if any, of the loss when filing our 2020 taxes?
Thanks.
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You need to decide whether you bought it as an investment or for a retirement home, because the tax treatment for the two is different. If it was an investment on which you intended to make a profit, and just weren't able to, that is a capital loss for tax purposes. If you bought it to build a house and never got around to it and eventually changed your mind, that is a personal loss and has no effect on your taxes.
This might be helpful: https://ttlc.intuit.com/community/in...perty/00/25623
Quote:
Originally Posted by CardsFan
I am not sure that is true. I inherited some property, sold it at a loss from the day of death value, and took a deduction as a capital loss. Maybe I was wrong, and it never got caught? Turbotax seemed to think it was OK.
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Quote:
Originally Posted by TrvlBug
We also inherited some property and were expecting a loss which our CPA told us would be a capital loss deduction. I don't know if this applies to OP's situation.
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Inherited property is treated like investment property (i.e. you can claim the loss) unless you live in/on it. If you lived there, then it's personal property and you can't deduct the loss.
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07-09-2020, 09:03 PM
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#9
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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 Trooper
Hi,
DW and I purchased an unimproved lot back in the boom days of real estate. Our thinking was either to use it as in investment or possibly build a retirement home on it one day.
Neither of those panned out, and we sold it last month at a significant loss.
What are we allowed to recover, if any, of the loss when filing our 2020 taxes?
Thanks.
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Sounds like investment to me and that while there was a possibility that it might be converted to personal use that in fact it never was converted to personal use.
__________________
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Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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07-09-2020, 10:15 PM
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#10
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Full time employment: Posting here.
Join Date: Dec 2012
Location: Chandler, AZ
Posts: 735
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Thanks everyone.
Quote:
Originally Posted by pb4uski
Sounds like investment to me and that while there was a possibility that it might be converted to personal use that in fact it never was converted to personal use.
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That is really my situation.
Quote:
Originally Posted by cathy63
You need to decide whether you bought it as an investment or for a retirement home, because the tax treatment for the two is different. If it was an investment on which you intended to make a profit, and just weren't able to, that is a capital loss for tax purposes. If you bought it to build a house and never got around to it and eventually changed your mind, that is a personal loss and has no effect on your taxes.
This might be helpful: https://ttlc.intuit.com/community/in...perty/00/25623
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Thanks for the link. If the property is considered investment property, how is the capital loss treated? Can I fully net the capital loss against all of my capital gains (sales of mutual funds, mutual fund capital gain distributions), or am I limited to $3,000 capital loss per year?
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07-09-2020, 11:15 PM
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#11
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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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I'm thinking the former.
__________________
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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07-10-2020, 08:14 AM
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#12
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Thinks s/he gets paid by the post
Join Date: Dec 2015
Location: Santa Paula
Posts: 4,067
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The $3000 limit applies after you deduct the loss from all your gains.
For example,
If your gains were $20,000 and your loss was $15,000 you can deduct all of it
However, if your gains were $15,000 and your loss was $20,000 you could only deduct $3000 that year. The remaining $2000 would be a capital loss carry forward you could deduct the following year.
__________________
Retired Jan 2009 Have not looked back.
AA 60/35/5 considering SS and pensions a SP annuity
WR 2% with 2SS & 2 Pensions
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07-10-2020, 11:02 AM
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#13
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Full time employment: Posting here.
Join Date: Dec 2012
Location: Chandler, AZ
Posts: 735
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Thanks Souschef. My situation is the second one in your response. Using your numbers I would have a LTCG of $0 and a LTCL of $3,000 in 2020, and I would start off 2021 with a LTCL of $2,000 to be netted against 2021 LTCGs?
What is the treatment of the 2020 LTCL of $3,000? Does it reduce Qualified Dividends or Ordinary Income?
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07-10-2020, 02:56 PM
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#14
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Recycles dryer sheets
Join Date: Jun 2010
Location: Southwest Florida
Posts: 470
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Quote:
Originally Posted by CardsFan
I am not sure that is true. I inherited some property, sold it at a loss from the day of death value, and took a deduction as a capital loss. Maybe I was wrong, and it never got caught? Turbotax seemed to think it was OK.
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Inherited property is a different situation. You were entitled to the loss but you may have gotten away with something. Normally if sold within a reasonable time after date of death the sales price becomes the DOD value and there is therefore no gain or loss.
Gill
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07-10-2020, 05:16 PM
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#15
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Thinks s/he gets paid by the post
Join Date: Feb 2012
Posts: 1,466
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Quote:
Originally Posted by Gill
Inherited property is a different situation. You were entitled to the loss but you may have gotten away with something. Normally if sold within a reasonable time after date of death the sales price becomes the DOD value and there is therefore no gain or loss.
Gill
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Our CPA advised that any loss would be calculated on the purchase price and disposal costs. We assumed a loss would happen based on the horrendous condition of the property (located in a small midwestern town), but we were pleasantly surprised. We sold at auction w/in a couple of months of death and used the sale price as DOD value.
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07-10-2020, 05:42 PM
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#16
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Thinks s/he gets paid by the post
Join Date: Jul 2002
Posts: 1,581
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Quote:
Originally Posted by Gill
Inherited property is a different situation. You were entitled to the loss but you may have gotten away with something. Normally if sold within a reasonable time after date of death the sales price becomes the DOD value and there is therefore no gain or loss.
Gill
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Many times a loss can be taken when you factor in the expenses of selling the property!
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07-10-2020, 05:45 PM
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#17
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Recycles dryer sheets
Join Date: Jun 2010
Location: Southwest Florida
Posts: 470
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Quote:
Originally Posted by RE2Boys
Many times a loss can be taken when you factor in the expenses of selling the property!
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Yes, of course.
Gill
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07-10-2020, 05:47 PM
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#18
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Recycles dryer sheets
Join Date: Jun 2010
Location: Southwest Florida
Posts: 470
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Quote:
Originally Posted by TrvlBug
Our CPA advised that any loss would be calculated on the purchase price and disposal costs. We assumed a loss would happen based on the horrendous condition of the property (located in a small midwestern town), but we were pleasantly surprised. We sold at auction w/in a couple of months of death and used the sale price as DOD value.
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Your CPA told you the basis of inherited property would be the purchase price? Was it inherited from an irrevocable trust?
Gill
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07-10-2020, 06:01 PM
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#19
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Thinks s/he gets paid by the post
Join Date: Feb 2012
Posts: 1,466
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Quote:
Originally Posted by Gill
Your CPA told you the basis of inherited property would be the purchase price? Was it inherited from an irrevocable trust?
Gill
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That's my recollection, however, I could be wrong. No trust involved.
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07-10-2020, 06:08 PM
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#20
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Recycles dryer sheets
Join Date: Jun 2010
Location: Southwest Florida
Posts: 470
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Quote:
Originally Posted by TrvlBug
That's my recollection, however, I could be wrong. No trust involved.
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Not all CPA’s are conversant with estate matters. If it was inherited from a decedent the basis is date of death value, the best indication of which is sale price within a reasonable time after death.
Gill
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