Real Estate Capital Gains

[Doug]

I have a question:

From IRS form i1040sd.pdf it says:
"If you sold or exchanged your main home,
do not report it on your tax return unless your
gain is more than your exclusion amount."

My exclusion amount should be $500,000 dollars since I am married and we
have lived in the same house for over six years.
I expect to receive $150,000 down payment this year, and the balance next
year with a gain of under $500,000.

I interpret this clause to mean that I say nothing about this sale when I
file my taxes both this year and next year.
Is this correct?

Thanks so much!
--Doug

 

[Phil Marti]

From IRS form i1040sd.pdf it says:
"If you sold or exchanged your main home,
do not report it on your tax return unless your
gain is more than your exclusion amount."

My exclusion amount should be $500,000 dollars since I am married and we
have lived in the same house for over six years.
I expect to receive $150,000 down payment this year, and the balance next
year with a gain of under $500,000.

I interpret this clause to mean that I say nothing about this sale when I
file my taxes both this year and next year.
Is this correct?

Probably not, unless you're allowing the delayed payment for free. It
sounds like an installment sale. You'll still get the cap gain exclusion,
but the interest will be taxable income.

 

[Paul Thomas, CPA]

From IRS form i1040sd.pdf it says:
"If you sold or exchanged your main home,
do not report it on your tax return unless your
gain is more than your exclusion amount."

My exclusion amount should be $500,000 dollars since I am married and we
have lived in the same house for over six years.
I expect to receive $150,000 down payment this year, and the balance next
year with a gain of under $500,000.

I interpret this clause to mean that I say nothing about this sale when I
file my taxes both this year and next year.
Is this correct?

As Phil said, the gain might be excluded, because it's under the $500,000
exclusion amount, but any interest on that second payment (or payments) is
reportable income when received, so in 2007.

 

[Doug]

As Phil said, the gain might be excluded, because it's under the $500,000
exclusion amount, but any interest on that second payment (or payments) is
reportable income when received, so in 2007.

This makes complete sense. I mostly wanted to be sure that splitting the
house payments across two tax years does cause any complications with the
capital gains. I would expect any interest I earn on the monies to be
taxable.

Thanks!
--Doug

 

[Arthur Kamlet]

From IRS form i1040sd.pdf it says:
"If you sold or exchanged your main home,
do not report it on your tax return unless your
gain is more than your exclusion amount."

Now that the problem has been solved (?) can someone please
explain the "or exchanged" in tha above quote?

 

[Paul Thomas, CPA]

Now that the problem has been solved (?) can someone please
explain the "or exchanged" in tha above quote?

Beats me. An exchange that isn't "like-kind", as in 1031 like-kind, because
personal residences don't qualify.

That's my best guess.

Don't know anyone who has actually done something along those lines.