Help w/Cap Gains Taxes on Rental Property

parsono10 · #1 (**permalink**) 09-17-2017, 01:19 PM

Background

1997 - purchased home A for $98,000 as primary residence
2001 - Refi $20k home loan for improvements
2005 - Refi $40k home loan for improvements
2008 - moved to new primary (home B) and rented out home A, refinanced and borrowed $130k against A for down payment on home B
2015 - Refinanced and borrowed $100k against home A for student loans
2017 - selling for $658k, existing mortgage balance $400k

Went to a CPA who somehow subtracted about $400k from the home A sales price which greatly lowered cap gains tax, is this allowed and correct? Any other advice?

Wnhough · #2 (**permalink**) 09-18-2017, 03:13 AM

the CPA Was CORRECT;you need to payoff the mortgage when you sell it .the exiting mort of $400K is part of your adjusted basis on sale of the home A;say,

You buys her home for $60k cash and assumes a mortgage of $240k on it. The starting point for determining her basis is $300k .what I Mean is that; Capital gains tax apply to certain types of sale, usually income properties, and refers to what you pay on that difference, after adjusting for a variety of exemptions, deductions and tax breaks.

parsono10 · #3 (**permalink**) 09-18-2017, 12:19 PM

Quote:

Originally Posted by Wnhough

the CPA Was CORRECT;you need to payoff the mortgage when you sell it .the exiting mort of $400K is part of your adjusted basis on sale of the home A;say,

You buys her home for $60k cash and assumes a mortgage of $240k on it. The starting point for determining her basis is $300k .what I Mean is that; Capital gains tax apply to certain types of sale, usually income properties, and refers to what you pay on that difference, after adjusting for a variety of exemptions, deductions and tax breaks.

Thanks very much for responding. I don't understand, what would stop somebody from re-financing and cashing out all equity to avoid cap gains tax altogether?