Sale of 2 houses together 1 rental Taxes? - Woodworking Talk - Woodworkers Forum
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post #1 of 17 Old 02-09-2017, 01:33 PM Thread Starter
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Sale of 2 houses together 1 rental Taxes?

Years ago I bought 2 houses, on adjacent lots for 1 price.
I rented one out all the time. Lived the other.
I sold both houses, together for 1 price, and hold a mortgage.
I can't find info on how to deal with paying gains on the rental property. Do I just take 1/2 of the amounts to figure it? 1/2 cost. 1/2 selling price?

IRS seems to have closed their phone line help.

Always done my own taxes and would like to continue to do so.
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post #2 of 17 Old 02-09-2017, 02:36 PM
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Always done my own taxes and would like to continue to do so.
I don't think I'd trust a bunch of woodworkers for tax advice. It's probably worth paying an accountant a few bucks to get a good answer.

Scott
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post #3 of 17 Old 02-09-2017, 02:40 PM
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indeed you will need some expert advice. with rentals depreciation, prior tax handling, etc. figures into it. I would not have trusted the IRS even if they had answered the phone - the Help lines are not re-known for their expertise in detailed areas.
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post #4 of 17 Old 02-09-2017, 02:58 PM
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Quote:
Originally Posted by Pirate View Post
Years ago I bought 2 houses, on adjacent lots for 1 price.
I rented one out all the time. Lived the other.
I sold both houses, together for 1 price, and hold a mortgage.
I can't find info on how to deal with paying gains on the rental property. Do I just take 1/2 of the amounts to figure it? 1/2 cost. 1/2 selling price?

IRS seems to have closed their phone line help.

Always done my own taxes and would like to continue to do so.
Whover has been doing your yearly tax returns is the one best to know the answer to the questions you are answering. They will know depreciation schedule used. They will know how much the rental property had been depreciated down to current.

Absolutely not a question for a woodworking forum.

George
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post #5 of 17 Old 02-09-2017, 04:16 PM
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George, he said he's always done his own taxes. OP probably hopes that a hobbiest who does tax prep by day might be able to help.


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post #6 of 17 Old 02-09-2017, 04:42 PM
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I'm a CPA. I am in corporate tax now, but I think I can answer enough to get you on your way.

I'm going to assume you didn't take depreciation on the rental property. If you did, you wouldn't be asking how to split your tax basis (cost) or the sales price. You would already have the answer because you would have assigned a value to the rental to come up with the depreciation.

Does each house have a separate property tax bill? If so, use the assessed or fair market value shown on the bills to come up with the relative tax basis (cost) and value (sales price) of each house.

If you've taken permits for improvements, the assessed value will reflect that.

If you get one property tax bill, are the structures listed separately? Same concept then.
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post #7 of 17 Old 02-09-2017, 04:54 PM
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Originally Posted by WesTex View Post
George, he said he's always done his own taxes. OP probably hopes that a hobbiest who does tax prep by day might be able to help.


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If he has been doing his own taxes and has to ask those questions he has already missed the boat.

He had better get with a pro NOW before the IRS gets him. And NOT a pro contacted over the internet.

George
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post #8 of 17 Old 02-09-2017, 05:40 PM
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Hi George, there's likely nothing for the IRS to "get him" on. It's fairly obvious that he's taken no depreciation, so there's no depreciation recapture to be concerned with.

Hey pirate, one more question, did you file the Schedule E every year? I'm thinking you didn't because you would already have your answer, since you would likely have taken the property taxes, and part of the interest expense as deductions against the rental income. See my earlier post about splitting the value.

Last edited by sanchez; 02-09-2017 at 05:52 PM.
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post #9 of 17 Old 02-09-2017, 05:52 PM Thread Starter
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Originally Posted by sanchez View Post
I'm a CPA. I am in corporate tax now, but I think I can answer enough to get you on your way.

I'm going to assume you didn't take depreciation on the rental property. If you did, you wouldn't be asking how to split your tax basis (cost) or the sales price. You would already have the answer because you would have assigned a value to the rental to come up with the depreciation.

Does each house have a separate property tax bill? If so, use the assessed or fair market value shown on the bills to come up with the relative tax basis (cost) and value (sales price) of each house.

If you've taken permits for improvements, the assessed value will reflect that.

If you get one property tax bill, are the structures listed separately? Same concept then.
Sanchez. thanks for the reply. I have done my taxes every year. I have taken depreciation on roof, etc. on the rental, but there was no cost of house involved, and I realize my depreciation will reduce the cost.
There are 2 tax bills. Are you saying I should get out the tax bill from when I bought the property to get value?
I have filed a schedule E every year.
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post #10 of 17 Old 02-09-2017, 06:38 PM
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I don't know how to do your taxes, but I could build you a mahogany inbox for all of your tax forms....Other than that I'm of no help.
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post #11 of 17 Old 02-09-2017, 07:47 PM
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See a CPA or find someone that is both a CPA and an attorney. Two for the price of one!
I now use a CPA as the chain tax service that my wife used screwed me out of deductions of a small business I had for several years. They never deducted anything that I turned in, I find out later.

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post #12 of 17 Old 02-09-2017, 11:53 PM
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Sanchez. thanks for the reply. I have done my taxes every year. I have taken depreciation on roof, etc. on the rental, but there was no cost of house involved, and I realize my depreciation will reduce the cost.
There are 2 tax bills. Are you saying I should get out the tax bill from when I bought the property to get value?
I have filed a schedule E every year.
Hi Pirate,

I am saying that you should use the property tax bills from the year you purchased them to come up with the relative value of each property. See my example below.

I am not saying to use the value on the property tax bill as your cost for the rental property.

Also, in my example, the 5 of depreciation will mean that the gain of 26 will be split into 5 ordinary gain and 21 capital gain because of depreciation recapture.
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Last edited by sanchez; 02-09-2017 at 11:59 PM.
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post #13 of 17 Old 02-10-2017, 04:10 PM Thread Starter
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I don't think I'd trust a bunch of woodworkers for tax advice. It's probably worth paying an accountant a few bucks to get a good answer.

Scott
No offence, but I know a lot of woodworkers that have more than sawdust between their ears. And some that don't!

Sort of like if I needed a cut made and wasn't sure how to do it, I wouldn't go to a cabinet shop to have it done. I would ask on the appropriate forum.
And I found one here.
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post #14 of 17 Old 02-10-2017, 05:48 PM
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Pirate, I understand what you are saying in reply to other posts but remember you are filing a tax return for various agencies including the federal government. If you make a mistake, the burden of proof in on your shoulders or on the person who prepared the return for you. I was audited once and that was enough. A close friend of my wife was an IRS auditor. Her statement was that the IRS will audit you and find something in your return that isn't kosher.
As I stated, I use a reliable CPA. If there is a question about my federal return, he is prepared to give the reason for the deduction.
BTW, his fee is deductible.
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post #15 of 17 Old 02-10-2017, 06:39 PM
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Pirate, I understand what you are saying in reply to other posts but remember you are filing a tax return for various agencies including the federal government. If you make a mistake, the burden of proof in on your shoulders or on the person who prepared the return for you. I was audited once and that was enough. A close friend of my wife was an IRS auditor. Her statement was that the IRS will audit you and find something in your return that isn't kosher.
As I stated, I use a reliable CPA. If there is a question about my federal return, he is prepared to give the reason for the deduction.
BTW, his fee is deductible.
Listen to this advise: listen very carefully. It is the best advise by far that you are going to get. From your post it is obvious that you know nothing about income taxes. You have probably been making mistakes all along. The purchase and sale of rental properties is an event that often flags the IRS for closer inspection.

George
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post #16 of 17 Old 02-10-2017, 08:00 PM
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Don't mess with the IRS until after it is "gone"

We should abolish this unnecessary government department. Just pay a flat tax, but that won't happen for a while, if ever. I don't have an answer, but a question.

When you bought the properties were there 2 deeds and property descriptions? If so, how did you get 1 mortgage on 2 properties? That seems to be a serious issue for taxes, both state, local and Federal and book keeping.

I don't know how any CPA could keep track of that deal, especially with one as a rental .... :frown2:

The answer to your question will only be as detailed and specific as the question is detailed and specific. Good questions also include a sketch or a photo that illustrates your issue. (:< D)
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post #17 of 17 Old 02-11-2017, 01:48 PM
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Originally Posted by sbrader View Post
I don't think I'd trust a bunch of woodworkers for tax advice. It's probably worth paying an accountant a few bucks to get a good answer.

Scott

This.
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