Question about capital gains tax
I am getting ready to purchase a property in NC using private funds...I am also going to purchase the property for me and my wife to live in...There is about a 50k spread on the purchase and was wondering if I sell it to myself and make 50k on it will I have to pay taxes on the cash? I am using bank financing to sell it to myself....
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No you can't make or lose money dealing with yourself. Your basis in the home will be the purchase price and whenever you sell it to another party you will recognize a gain. However, it sounds like it is going to be your principal residence so you will be eligible for a $250,000 ($500,000 married filing joint) gain exclusion which basically means if you have a $250,000 or less gain, or $500,000 if you're married, on the sale of your principal residence then you pay no taxes. To qualify for this exclusion you have to live in the home for 2 out of 5 years I believe. If you move before the 2 years, then you will have to pay taxes on any gains incurred.