A friend of mine no less asked me a tax question today. He is selling a some undeveloped land he purchased 30 years ago at a $24,000 profit. He asked me what his capital gains tax would be. I pretended I was an attorney and said "I'll get back to you on that."
What is it and upon what does it depend?
Dick
The capital gains tax is based on the amount of profit made and the length of time that he held the capital asset. Profit (or gain) is equal to adjusted selling price minus adjusted purchase price. Generally, cost is what he paid for the land 30 years ago, possibly increased by any capital improvements made since then (fences, service roads, utility services, etc). Long term capital gain (more than one year holding) rates are maxed at 15% of the gain.
Somewhere between zero and $3,600, depending on what else is on his return. It's 5% on the amount that takes him to the top of the 15% bracket and 15% above that.
-- Phil Marti Clarksburg, MD
Dick,
You came to the right place! No attorneys here :)
15% quick answer unless in a bracket below 25%, in which case it would be 5%. Now to gum things up a little there are the usual questions about loss carryforwards, installment sales and such. There are also issues of AMT and phase-out of deductions and exemptions, which could make the answer 22%. So if taxpayer is real rich or real poor you can use the short answer, but for most in the middle you really have to figure the tax with and without. Bill Brunell
The capital gains tax rate depends on all other income.
Holiday ChEAr$, Harlan Lunsford, EA n LA
I knew a lot of people would offer responses to this question, just not so many Bills. Bill Brown
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