Discussion:Tax planning question for 2007 likely trx
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Vermontcpa (talk|edits) said: | 19 February 2007 |
| MFJ with only one earning wages and other heavy heavy medical bills for 2007. They are getting ready to sell vacant land with Long term capital gains of $200k+. Anything they can do to help minimize the tax bill here? Also, won't the huge gain trigger a substantial higher hurdle on the medical itemized deduction possibly eliminating all of the medical for 2007? What to do? | |
| February 19, 2007 | |
| 1.) Sell the land in 2008.
2.) Yes 3.) Sell the land in 2008. | |
Death&Taxes (talk|edits) said: | 19 February 2007 |
| Or sell in 2007 on installment note but get enough down that the buyer does not walk away. | |
| February 19, 2007 | |
| Good idea! I was trying to figure out how they could sell the land in 2006 and didn't even think of doing a 6252.
How about a down payment in 2007, with the balance due to be paid in 2008 (if medical expenses are estimated to be much less in 2008 than in 2007)? | |
Death&Taxes (talk|edits) said: | 19 February 2007 |
| You might even look at using the zero percent cap gain percentage for 2008-2010 if income is low and having the balloon come due in a later year. All depends on credit-worthiness of buyer. Separate returns could be done in 2007 too if the gain is joint, but you have to do an AMT projection on the medical expense person. I am just trying to figure out how you know you will have medical expense unless it is something like teeth. I mean you just can't plan your nervous breakdown ahead of time. In vitro is another possibility you know in advance. | |
Michaelstar (talk|edits) said: | 19 February 2007 |
| The sale will certainly cause agi to increase - the 7.5% will also increase as well....... Watch out the AMT as D&T pointed out. With such a large capital gain - your t/p will be in AMT unfortunately. | |
Vermontcpa (talk|edits) said: | 24 February 2007 |
| D&T
I like your idea on the 2008 0% cap gains. So if t/p are in the 10% or 15% bracket in 2008 they could have 0% capital gain rate on gain of $200k? I guess I need to confirm that the capital gain itself is excluded from the taxable income assumption on what % the regular tax is to qualify for the 0%... please confirm and shoot a link if you can. Thanks | |
Death&Taxes (talk|edits) said: | 24 February 2007 |
| I honestly don't know the mechanics at this point, but suspect that the bracket must come from income including the capital gain. I am sure this will be a topic at seminars this year. | |
| April 6, 2007 | |
| I need to find out the mechanics at this point and am wondering if the bracket is figured from regular income plus the capital gain. We all need to know this soon. | |
| 7 April 2007 | |
| The mechanics are very simple. The amount eligible for the 2008 zero percent capital gains rate is the same as the amount eligible for the 5% capital gains tax rate in 2006 (as adjusted for inflation). In other words, the 0% tax applies to the portion of the capital gain that falls below the 25% bracket, after adding in the non-capital gain income. See Sec. 1(h)(1)(B). | |
