Capital Gain in CA

[gpvistan]

Hi Everyone, I bought my brand new house last October of 2004 for $308K I refied last April and combined my two loans into one loan. My new loan balance is $351K. Thats including paying off one of my car, landscaping and prepayment penalty. We are thinking of selling to buy another house. We would like to move where there is new school, so when my daughter starts school in a few months, she has a school to go to. Also we would like to sell now before interest rates goes up and before houses gets too expensive. Realtor told me that I could sell my house for $485. I was just wondering if I still have to pay capital gain. I live in CA

[S T]

Capital Gain Personal Residence

If this is your personal residence you will have capital gains to pay for both Federal and California.

Capital Gain exclusion applies to a personal residence if you own and live in the home for 2 years out of 5 years, unless you can qualify under the reduced exclusion rules.

It seems by your post that you have only lived in the Home since October, 2004, barely 1 year, you will need to have lived there until October, 2006 (2 full years).

For info, the refinanced loan amount has no bearing on the gain calculation.

Sandy

[RLymanC]

Sale of Residence

The reduced exclusion rule could work for you. It's not mandatory that you live in your home for the full 2 years.

Some examples are:
The catch all could be "unforseen circumstances"
1- The circumstance causing the home sale occured during the time you owned and used property as main home.

2- The circumstance causing the sale were not reasonably forseen when you bought the home.

3- The suitablity of the property as the taxpayer main home materially changed

4- A change in place of employment

A taxpayer does not qualify for a reduced exclusion if the primary reason for the sale is a preferance for a different home or an improvment in financial circumstances.

If the unforseen circumstances do not apply, you have a capital gain and that tax is due in the year of sale.

[Bees Knees]

Selling the house before interest rates go up and houses get too expensive does not qualify for the reduced exclusion rule.

[B C]

Exclusion

I agree that a reduced exclusion would not work based on the facts presented. Unforseen means something not planned. It sounds like things are planned out pretty well. Hang on for the two year limit or you'll have to pay the tax.