Sale of Second House

[Lion]

Client bought a house for his daughter to live in, not a rental, not for investment, for purely personal reasons. Now daughter's circumstances have changed, so client sold house, not to daughter. Client never lived there. In my sleep deprived state, I just don't feel confident I'm reporting this correctly. Is this just like the sale of most capital assets on Schedule D? He bought in 1999 for $185,000 and sold in 2009 for $225,000. Closing costs were fairly small at both ends, he paid cash and didn't even have a realtor at his purchase; but that still adds a bit to his basis.

If this is plain vanilla 15% capital gain, then with his minimal income now (SS and $3,500 pension) it's actually taxed at 0%. Right?

[DaveO]

I agree. Good timing for him.

[Roland Slugg]

Well, it is a LTCG, but whether or not he pays any federal taxes on it depends on his actual taxable income. The gain will almost certainly cause some (up to 85%) of his social security to become taxable. And if he lives in a state with an income tax, he will likely incur a state tax liability.

[Lion]

Thank you all

Thank you, Gentlemen. Yes, it does kick some of his SS into taxable, but he's still in the 0% LTCG rate. And, CT taxes him on all income, but his property tax deduction is enough to eliminate CT tax. So, he files both returns but has zero tax liabilities on both. I just hadn't had anyone fall into the 0% capital gain rate yet. I wasn't sure that a sale of a personal use house, not an investment property, didn't have some funky capital gain rate like collectibles or something! I did try TTB and Lasser and my CCH IntelliConnect, but figured if I didn't know the terms to search on, I could still miss something. Thanks for helping me.