Captial Gains Tax? Bring your Calculators :) (San Jose: bank owned, sales, real estate) - Los Angeles - California (CA) - City-Data Forum

islandsunshine · 03-30-2007, 07:42 AM

I have a question if I may? A friend of mine and I were discussing California captial gains tax and thought I would see if anyone here could help.(Aprox if fine)

Here is the senerio 1997 buys a house for 280K and sells for 1,000,000. But have taken out a line of equity for paying off bills, some rennovations (50K)etc. so now she owes $825,000 How much capital gains she is going to have to pay?

She plans on moving to AZ and took 85K of this money from the line of equity to buy land in AZ.

Her home is already listed and I read that Calif. has one of the highest Capital gains. She is in a panic over this now.

Thanks!

Roma · 03-30-2007, 07:47 AM

Well for starters, she will NOT be taxed for the first $500,000 she made. Anything after that she will be.

fostoria · 03-30-2007, 07:59 AM

Your friend will only get the $500k exemption if it is a married couple and they have lived in the home for 2 of the past 5 years, if it is a single person, the exemption is $250k.

Bill

Roma · 03-30-2007, 08:03 AM

Yes, The 500k exemption is if you are married and 250k if you are single.
The Capital Gains Tax is the same in all states I believe. But I have never done a line of Equity so I don't know how that would play in.

fostoria · 03-30-2007, 08:23 AM

Any tax would be based upon the cost of the home plus any improvements made over the period of ownership. When sold, add any exemption from the adjusted cost basis and subtract that from the sales price (net of any sales costs, commissions etc). That figure is what would be taxable. The fact that they had line of credit does not enter in into the equation.

If your friend sold the home for 1,000,000 which was purchased for $280,000 and is single, the taxable portion would be $470,000, if married, it would be $220,000. I would imagine that there would be some improvements that could lessen the taxable portion. In the end, the Fed's will want 15% and the govenator of California will take 9%. As a side note, your friend made a good investment and decided to take some money early. They were wise to get out when they did, if you believe the real estate gloom/doom.

Bill

islandsunshine · 03-30-2007, 04:39 PM

Thanks everyone! Well then that isn't too bad. Her hub owned the house and she married him 2 years ago SHE made a good investment! (she had nothing) The house isn't sold yet and they are asking 1.2 million but I am thinking theywill get 1 mill. it's been on the market for 6 months with no takers. So I'm not thinking they will get the full price. So they won't owe too much. Fostoria is the market bad there now? Their house is in San Jose so maybe a easier area to sell from. I don't know!

Thanks!

ferretkona · 03-30-2007, 08:34 PM

My wife gave me a article recently that said capital gains tax can be waived if you are moving because of employment.

vfrpilot · 03-30-2007, 08:47 PM

Quote:

Here is the senerio 1997 buys a house for 280K and sells for 1,000,000. But have taken out a line of equity for paying off bills, some rennovations (50K)etc. so now she owes $825,000

Boy! Those must've been some mighty hefty bills!

fostoria · 03-31-2007, 10:00 AM

Islandsunshine,

I am not from the San Jose area, I'm in So Cal... As a real estate appraiser, broker, investor and overall nice guy, I would imagine that your friend's area is suffering and will contiue to suffer from the real estate slow down.

I looked at recent data on the city of S.J. and found 125 current bank owned properties taken back at foreclosure. There are currently 692 properties in some stage of foreclosure, not yet bank owned. Realtor.com shows 3466 current home on the market. S.J. is a major city so in relationship to the overall home count these numbers are still small.

Most of the defaulted loans were taken out within the past 3 years. Buyers felt they had to get into a home as home prices shot through the roof. In doing so, they did what ever it took to get a home. Lenders, seeing the property values escalate, relaxed lending criteria to allow 100% financing (80% 1st & 20% 2nd) loans based upon fico scores. In many cases they did not verify income as the borrower simply stated an income which was enough to qualify. These loans were generally low start rate (1-3% interest) adjustables.

1-3 years later these loans have now adjusted to the actual rates and property values have leveled and in many areas already dropped. The borrowers of these loans really couldn't afford them at the teaser rate and now with nothing invested in the property, no way to refinance, unable to sell in a flat market, simple walk away.

I have seen where the banks have foreclosed only on the 80% 1st and the 20% second dis-appears. If no one bids at the trustee sale, then the bank gets the home back. In some instances where the bank only foreclosed on the 80% 1st, they then price the home at/near that dollar amount which, while a good deal for the new buyer of the foreclosed home, puts additional downward pressure on that areas market value as now here is another comparable.

If their home is listed with a broker, I would suggest that they increase the commission to the selling broker to attract more attention. This has worked for me.

Bill

islandsunshine · 03-31-2007, 11:43 AM

HI again!

Well, they are not moving for a job. They are actually planning on opening a bar. (this is her idea)

Yep the bills must have been hefty. Can you imagine? I think it is a matter of my friend (well I should say she is not a buddy, more like an aquaintance) Anyway I think she just got happy and had him 2 line of quity loans and had some fun.

Fostoria,is there a site that shows how many homes are bank owned or ready for foreclosure? How do people find homes that are ready to go into default or foreclosure?

Thanks!