Taking a loss on sale of property (paying, taxes, income)

[hapaleeretired]

15 years ago we bought a piece of property for 35k. Stupidly we paid cash and have been paying HOA dues and taxes on it ever since. We have tried to sell it but that's not going to happen.
An investment company has offered to buy it from us for $5600.
What tax advantage would we get for taking a 30k loss?

[Moonlady]

Yes, you can claim the loss but only $3000 per year (net of gains). You can carry the loss over to forward years if it exceeds $3000. The best resource is the IRS website. Here's a link and an excerpt that summarizes the rules on capital gains loss.

https://www.irs.gov/taxtopics/tc409


Limit on the Deduction and Carryover of Losses

If your capital losses exceed your capital gains, the amount of the excess loss that you can claim to lower your income is the lesser of $3,000 ($1,500 if married filing separately) or your total net loss shown on line 16 of the Form 1040, Schedule D.pdf. Claim the loss on line 13 of Form 1040, Schedule 1.pdf and attach to your Form 1040.pdf. If your net capital loss is more than this limit, you can carry the loss forward to later years. You may use the Capital Loss Carryover Worksheet found in Publication 550, Investment Income and Expenses or in the Form 1040, Schedule D Instructions to figure the amount you can carry forward.

By the way, I did this as well. Bought a piece of property in 1981 and finally sold it and took a loss about 20 years later. You can't write off the losses of the taxes and HOA fees though.

[MrRational]

Originally Posted by hapaleeretired

What tax advantage would we get for taking a 30k loss?

Originally Posted by NOLO

A loss on the sale of a personal residence is considered a nondeductible personal expense.
You can only deduct losses on the sale of property used for business or investment purposes. The only way you
can obtain a deduction if you sell your home at a loss is to convert it to a rental property before you sell it.

15 years ago we bought a piece of property for 35k...we paid cash

Did you OVERpay at that time? It's hard to imagine where that would be the case.

We have tried to sell it but that's not going to happen.

How impractical is it to just hunker down a while longer?

So far that $35,000 comes out to $194 per month... 5 more years makes it just $146 per.
Either way that's cheap rent.

[mathjak107]

Originally Posted by hapaleeretired

15 years ago we bought a piece of property for 35k. Stupidly we paid cash and have been paying HOA dues and taxes on it ever since. We have tried to sell it but that's not going to happen.
An investment company has offered to buy it from us for $5600.
What tax advantage would we get for taking a 30k loss?

you can offset other gains with it that qualify but not interest ... anything you don't get to use gets carried over , except you can apply up to 3k a year of it against regular income ..

in PA where we had our house the people on either side of us just owned lots ...we offered to buy them back then so no one built on either side of us , but they wanted to much money so we said forget it .. today they are worth 30% less then we offered 9 years later...

[jiminnm]

Originally Posted by hapaleeretired

15 years ago we bought a piece of property for 35k. Stupidly we paid cash and have been paying HOA dues and taxes on it ever since. We have tried to sell it but that's not going to happen.
An investment company has offered to buy it from us for $5600.
What tax advantage would we get for taking a 30k loss?

If the land was an investment property, and you can demonstrate that, then the recommendations above will apply. However, if it cannot be demonstrated that the land was investment property, it would be considered personal use property, and losses on personal use property are not deductible.

[mathjak107]

Good point .. usually we buy lots hoping they go up , but If all along expenses were not taken as deductions you are likely stuck with a personal purchase ...you would need a history of write offs on your taxes each year to have an investment property ....this don’t look good for the op if it was not done all along..

Real estate taxes , hoa fees ,etc would all have to have been taken

[Bradmilano]

Originally Posted by mathjak107

Good point .. usually we buy lots hoping they go up , but If all along expenses were not taken as deductions you are likely stuck with a personal purchase ...you would need a history of write offs on your taxes each year to have an investment property ....this don’t look good for the op if it was not done all along..

Real estate taxes , hoa fees ,etc would all have to have been taken

Or a sec 266 election made to capitalize the expenses

[mathjak107]

i got a feeling the op did nothing to change this from personal to investment property along the way so it may now be a moot point and it is what it is , personal .

https://blog.foxwealthmgmt.com/2016/...-266-election/

[Okey Dokie]

Originally Posted by jiminnm

If the land was an investment property, and you can demonstrate that, then the recommendations above will apply. However, if it cannot be demonstrated that the land was investment property, it would be considered personal use property, and losses on personal use property are not deductible.

Thanks for clarifying this (which was also my understanding). Unfortunately I have sold two personal residences at a loss, and here I was panicking thinking I should have deducted those losses!

[lchoro]

You should be deducting the expenses for investment or rental property on Schedule E. When the property is sold, the gross proceeds, cost basis, and net gain or loss are reported on Schedule D.

It sounds like the land has no connections to utilities in order to fetch such a low price.