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  1. #1
    Join Date
    Aug 2011

    Default Long Term vs. Short Term Capital Gains

    California Real Estate

    I have owned 50% of a building (mixed residential & retail) for 8 years.

    I was gifted the second half (other 50%) on May 4, 2011.

    The building is split into 3 separate units. Downstairs (retail), majority upstairs (my residence), small upstairs (a rental apartment).

    Depending on how this year goes, I should be in the 15% tax bracket. There is a small chance I may end up in the 25% bracket (married, filing jointly)

    If I were to sell the building BEFORE May 5, 2012, what would my Gains Liability be? Is it 1/2 short 1/2 long (given I've owned half the building for several years, half less than a year)?

    Would I still qualify for part of a break for the part that I've lived in the last several years?

    Am I better off just waiting to close until after May 5, 2012?

    I'm worried about gains tax going up in 2013, and wanting to sell BEFORE then.

  2. #2
    Join Date
    Jul 2007

    Default Re: Long Term vs. Short Term Capital Gains

    Your original 50% is long term. The gifted portion retains the holding period of the giver, so if that was over a year then it will also be long term regardless of sale date. There is no way to calculate your exact libility on the long term gain without knowing the exact amounts of all your other income.

  3. #3
    Join Date
    Sep 2010

    Default Re: Long Term vs. Short Term Capital Gains

    The other unstated issue is what the basis is. The original half would be whatever you paid for it (plus capital improvements) and the gifted part would get whatever the giver's basis was.
    However since part of this appears to be rental property there is depreciation that is going to have to be taken and recaptured (even if you didn't do it when you were supposed to).
    Further, since part of this is your principal residence (hopefully you've been there at least 24 out of the previous 60 months) then some of the gain attributed to that may be excluded.

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