Discussion:2008 - 2010 Capital Gains Rate

From TaxAlmanac, A Free Online Resource for Tax Professionals
Note: You are using this website at your own risk, subject to our Disclaimer and Website Use and Contribution Terms.

From TaxAlmanac

Jump to: navigation, search

Discussion Forum Index --> Tax Questions --> 2008 - 2010 Capital Gains Rate

Deback (talk|edits) said:

April 6, 2007
A client will be selling a farm that he and his two brothers inherited several years ago. His share is 1/3. The property is currently listed for sale at $750,000. His taxable income for 2006 was $39,792. My understanding is that those in the 10% and 15% brackets will pay zero capital gains tax in 2008 through 2010.

He doesn't know what his cost basis is yet and will be dealing with an attorney for that (his aunt actually signed the property to him and his brothers on a quit-claim deed about five years before she died, so it may not be able to be treated as an inheritance).

If his gain is approximately $200,000, and he is in the 15% bracket without including the gain, does this mean he would pay zero Federal tax if he waits and sells the property in 2008? Or is the tax bracket figured when combining regular income plus the capital gain?

Dennis (talk|edits) said:

6 April 2007
My impression is that the calculation will follow the worksheet, so most of that gain will not be at the zero % rate.

Death&Taxes (talk|edits) said:

6 April 2007
Is it PVV who is taking odds that the zero percent rate won't last this year? I agree with Dennis.

Deback (talk|edits) said:

April 6, 2007
Thanks. I'm thinking that he would pay zero capital gains tax on the part of the gain that is added to taxable income of about $39,792 up through about $61,300 (where the 25% rate kicks in) --or about $21k to $22k of cap gain at zero % tax.

Kathyt (talk|edits) said:

6 April 2007
I agree, I have a situation that's almost identical to what you described. I'm pretty certain that it would follow the worksheet too, so we were talking about an installment agreement. My question was though, if with the installment agreement and interest on that installment note, if he goes into the next bracket by 10,000; will only 10,000 be taxed and the rest at zero, or will he loose the zero rate. And Deb-if he's on social security it'll still make part of that taxable.

Riley2 (talk|edits) said:

6 April 2007

The amount of the gain that would be subject to the zero percent tax rate would be very small in this case. Subtract the taxpayer’s noncapital gain income of $40,000 from $63,700 to arrive at the amount of the capital gain eligible for the zero percent amount. In other words, the first $23,700 of the capital gain would not be taxed, and the balance of the gain would be taxed at the 15% rate.


Deback (talk|edits) said:

April 6, 2007
Thanks, Gene (Gene?) and everyone who agreed with Dennis!

Kathy - You're absolutely correct. Thanks for the reminder about taxable SS.

For 2006, $15.7k of his $26.7k SS was taxable, so if he sells the property in 2008, 85% of his SS will be taxable, which will reduce the amount of capital gain taxed at zero percent by about $8,100 (SS adjusted up to an estimated $28k for 2008). So, now the non-taxable hypothetical gain is down to about $15,600, and at 15% savings, he would only save about $2,340 if he waits until 2008 to sell the property. I think he should sell it whenever a buyer comes along, since they are unwilling at this time to lower the $750k asking price for the 150 acres.

Vbcpa (talk|edits) said:

7 April 2007
Deb- hey was that a clue for "Riley!, Who luv's ya baby? ---No Takers?"

PVVCPA (talk|edits) said:

April 7, 2007
Nothing is gonna be taxed at zero, because we will never see it. $50 bucks. C'mon! Somebody bet me!

PVVCPA (talk|edits) said:

April 7, 2007
I wonder why they (Republicans) decided to make 2008 the 0% cap gains year? What else is going on in 2008? Oh I know! Leap year!...No, that's not it.

Froeh (talk|edits) said:

16 April 2007
I have one more question about this discussion, currently there is a 5% capital gains tax rate for the lower income bracket. For the hypothetical situation above, the person is saving 5% of $23700 or $1185 by selling in 2007 versus 2008. Is this correct?

To join in on this discussion, you must first log in.
Personal tools