National Real Estate Sales Tax

[duanecpa]

It is my understanding that there is going to be a 3.8% tax on the profits on the sale of a private residence - is this correct? If so, what year does this tax become effective?

Thank you.

[MLINDER42]

National Real Estate Sales Tax

I think you are misinformed.Never heard of it.

[Maribeth]

Health Care Reform Act of 2010: "The law imposes, on taxable years beginning after December 31, 2012 on both individuals and estates and trusts, a new tax that is in addition to any other tax imposed. This tax is applied annually in an amount equal to 3.8% of the lessr of net investment income for such taxable year, or the excess of MAGI, over the threshold amount. For these purposes, the threshold amount means: (i) in the case of a taxpayer filing a joing return or a surviving spouse, $250,000; (ii) in the case of a married taxpayer filing a separate return, $125,000; and (iii) in any other case, $200,000." -- taken from a CPE video broadcast manual from the Edward Jones series of tax seminars.

If you have not already taken a CPE class in the new health care reform act, you really need to do so before the end of the year.

Maribeth

[Bees Knees]

It is my understanding that there is going to be a 3.8% tax on the profits on the sale of a private residence - is this correct? If so, what year does this tax become effective?

Thank you.

Maybe yes if the private residence is not a principal residence. Maybe no if it is not a principal residence. See the following bogus email thread.

http://www.thetaxbook.com/forums/showthread.php?t=15467

At any rate, it is not a National Sales tax.

[taxmandan]

It is my understanding that there is going to be a 3.8% tax on the profits on the sale of a private residence - is this correct? If so, what year does this tax become effective?

Thank you.

Aw gee, don't be givin' them Congress people ideas.

[duanecpa]

Section 1402 of the Reconciliation Act

According to a CPE course, the following is stated:

Section 1402 of the Reconciliation Act expands the hospital insurance tax to include a 3.8 percent tax on the lesser of:

1. an individual's net investment income for the year, or
2. the amount an individual's modified adjusted gross income above $200,000 for singes, $250,000 for married filing jointly, or $125,000 married filing separately (only income in excess of these amounts is subject to the tax).

Investment income is income from interest, dividends, annuities, royalties, rents and net gain from disposition of property that is not derived in the ordinary course or trade or business, excluding active S corporation or partnership income. Net investment income is investment income reduced by deductions allocable to such income.

[Bees Knees]

Investment income is income from interest, dividends, annuities, royalties, rents and net gain from disposition of property that is not derived in the ordinary course or trade or business, excluding active S corporation or partnership income. Net investment income is investment income reduced by deductions allocable to such income.

If you continue to read on in Section 1402 of the Reconciliation Act, you will also note that net investment income does not include income excluded under the code, such as tax-exempt interest, and gains from the sale of a principal residence under Section 121.

There is no national sales tax on the profits from the sale of a private residence, as implied in your original post. There is an additional 3.8% Medicare tax on the profit from the sale of a residence on the portion of that profit that is not excluded under Section 121, assuming the income thresholds are met.

[duanecpa]

CPE Course - missing information

Where can I obtain a full copy of the new laws? The CPE course stops where I stopped and does not include what you indicate is additional information that clarifies the one sentence.

Thank you

[Lion]

Irc

I use IntelliConnect for research to get to the Code, explanations, etc. However, you can put together your own free research tools. Start with IRS.gov, Tax Professionals, Code, Regs, & Guidance. See the many other IRS pages, such as News & Events where you can sign up for e-News to get the latest emailed to you. Your software may offer emailed updates (mine does). So do the various professional associations, such as NAEA, NATP, etc. You can Google or search for topics you know you'll be brushing up on this fall, such as new tax laws, and then bookmark the sites you like best.

[Bees Knees]

Where can I obtain a full copy of the new laws? The CPE course stops where I stopped and does not include what you indicate is additional information that clarifies the one sentence.

Thank you

Here is the law:

http://www.thetaxbook.com/updates/thetaxauthority_update_service/pdf/govdocs/hr4872.pdf

On page 33, it says:

‘‘(c) NET INVESTMENT INCOME.—For purposes of this chapter—
‘‘(1) IN GENERAL.—The term ‘net investment income’ means
the excess (if any) of—
‘‘(A) the sum of—
‘‘(i) gross income from interest, dividends, annuities,
royalties, and rents, other than such income
which is derived in the ordinary course of a trade
or business not described in paragraph (2),
‘‘(ii) other gross income derived from a trade or
business described in paragraph (2), and
‘‘(iii) net gain (to the extent taken into account
in computing taxable income) attributable to the disposition
of property other than property held in a trade
or business not described in paragraph (2), over
‘‘(B) the deductions allowed by this subtitle which are
properly allocable to such gross income or net gain.

The key words being: “to the extent taken into account in computing TAXABLE income…”

In other words, if the gain is not subject to tax under the code (i.e. tax-exempt interest…excluded gain under Section 121, etc.), then it is not taken into account in computing taxable income and thus not considered “net investment income.”