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#4
06-21-2005, 10:48 PM
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 Re: Capital gains on forclosure property << General Disclaimer: > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << It cannot be used by any taxpayer for the purpose of > << avoiding penalties that may be imposed on the taxpayer. > << ================================================== ===== > - quote - > > > 2. If so, would it be a long-term or short-term gain? I
You are correct that one needs to look at state law (that's> > > assume long-term because the original owner had 3 years to > > > redeem (but Fred had to keep paying the taxes every year, so > > > 1/3 of his investment would have been made in the current > > > year). > > His date of purchase is when he became the owner. Typically, > > this is after the 3 year period when the certificate has not > > been redeemed by the owner and the county issues him the tax > > deed. > I would have said he became the owner when he first bought > it: he was long the property, short an option for the > previous owner to redeem. But I suspect it's a matter of > local law precisely what he owned when. > (But if he had to pay property taxes during the 3 year > period, I'd be inclined to think of him as the owner then.) > On the other hand, if in 2002 he purchased an option to get > the property, the option exercisable only if the original > owner didn't redeem, then wouldn't the holding period for > the option be included in the holding period for the > property, making it long-term anyway? why I said "typically". Usually in these cases, the buyer just purchases a tax lien certificate that pays an above average rate of interest. Ownership doesn't come until the buyer of the certificate actually executes the sale after the waiting period. -- Alan http://taxtopics.net << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << Copyright (2005) - All rights reserved > << -------------------------------------------------> |
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#3
06-21-2005, 04:51 AM
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| Re: Capital gains on forclosure property "Richard Barndt" <richard[at]imt.net> wrote: - quote - > A hypothetical situation here:
If he is an investor probably. If he does this regularly,> Investor Fred acquires a property via tax deed. He acquired > the property by paying the back taxes and the original owner > never redeemed. He then sells the property near market > value. > 1. Is this a capital gain transaction? no. - quote - > Is Fred's cost basis
Amount paid. What else COULD it be?> the amount he has paid or the taxable value of the property? - quote - > 2. If so, would it be a long-term or short-term gain? I
It's long-term if capital gain, but only because you just> assume long-term because the original owner had 3 years to > redeem (but Fred had to keep paying the taxes every year, so > 1/3 of his investment would have been made in the current > year). mentioned WHEN it was purchased right here. -- David M. Woods, EA, ChFC, CLU Woods Financial Services Norwood, MA 02062 www.woods-financial.com << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << Copyright (2005) - All rights reserved > << -------------------------------------------------> |
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#2
06-21-2005, 04:51 AM
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| Re: Capital gains on forclosure property - quote - > > 2. If so, would it be a long-term or short-term gain? I
I would have said he became the owner when he first bought> > assume long-term because the original owner had 3 years to > > redeem (but Fred had to keep paying the taxes every year, so > > 1/3 of his investment would have been made in the current > > year). > His date of purchase is when he became the owner. Typically, > this is after the 3 year period when the certificate has not > been redeemed by the owner and the county issues him the tax > deed. it: he was long the property, short an option for the previous owner to redeem. But I suspect it's a matter of local law precisely what he owned when. (But if he had to pay property taxes during the 3 year period, I'd be inclined to think of him as the owner then.) On the other hand, if in 2002 he purchased an option to get the property, the option exercisable only if the original owner didn't redeem, then wouldn't the holding period for the option be included in the holding period for the property, making it long-term anyway? Seth << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << Copyright (2005) - All rights reserved > << -------------------------------------------------> |
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#1
06-16-2005, 11:37 AM
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| Re: Capital gains on forclosure property Richard Barndt wrote: - quote - > A hypothetical situation here:
Yes it is the sale of a capital asset. His cost basis is> Investor Fred acquires a property via tax deed. He acquired > the property by paying the back taxes and the original owner > never redeemed. He then sells the property near market > value. > 1. Is this a capital gain transaction? Is Fred's cost basis > the amount he has paid or the taxable value of the property? what he paid for the property. - quote - > 2. If so, would it be a long-term or short-term gain? I
His date of purchase is when he became the owner. Typically,> assume long-term because the original owner had 3 years to > redeem (but Fred had to keep paying the taxes every year, so > 1/3 of his investment would have been made in the current > year). this is after the 3 year period when the certificate has not been redeemed by the owner and the county issues him the tax deed. -- Alan http://taxtopics.net << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << -------------------------------------------------> |
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06-16-2005, 11:18 AM
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| Re: Capital gains on forclosure property Richard Barndt <richard[at]imt.net> wrote: - quote - > Investor Fred acquires a property via tax deed. He acquired
Yes. He bought property and sold it. (Unless he's in the> the property by paying the back taxes and the original owner > never redeemed. He then sells the property near market > value. > 1. Is this a capital gain transaction? business of doing this, but if it's a one-time deal that isn't the case.) - quote - > Is Fred's cost basis
Basis is the amount he paid to buy it, namely the back> the amount he has paid or the taxable value of the property? taxes. - quote - > 2. If so, would it be a long-term or short-term gain?
How long did he own it?- quote - > I assume long-term because the original owner had 3 years to redeem
So Fred owned it for over 3 years? Then definitelylong-term. - quote - > (but Fred had to keep paying the taxes every year, so
Wait a minute: what about those back taxes? That's his> 1/3 of his investment would have been made in the current > year). purchase price; the annual taxes are a separate issue. Seth << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << -------------------------------------------------> |
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#-1
06-15-2005, 10:42 AM
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| Capital gains on forclosure property A hypothetical situation here: Investor Fred acquires a property via tax deed. He acquired the property by paying the back taxes and the original owner never redeemed. He then sells the property near market value. 1. Is this a capital gain transaction? Is Fred's cost basis the amount he has paid or the taxable value of the property? 2. If so, would it be a long-term or short-term gain? I assume long-term because the original owner had 3 years to redeem (but Fred had to keep paying the taxes every year, so 1/3 of his investment would have been made in the current year). << -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << -------------------------------------------------> |
| Tags |
| capital, forclosure, gains, property |
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