My father has some real estate he would like to sell. I'm trying to
estimate the capital gains taxes. From what I've read, the tax rate
depends on whether the real estate is Section 1250 real property. What
I tried to find the answer on the IRS website. What it says,
specifically, is that an exception to the standard 15% capital gains
tax rate applies to "Section 1250 real property that is required to be
recaptured in excess of straight-line depreciation". When I try to
look up "Section 1250 real property", I find that it is defined as
"all real property that is subject to an allowance for depreciation
and that is not and never has been section 1245 property". That is a
very confusing definition, and I have no idea whether my father's
property falls into the category. Can anyone provide a simpler
explanation that might help?
Also, from what I understand, the 15% capital gains rate is scheduled
to increase to 20% in 2011. Will there be a similar increase in the
25% tax rate for Section 1250 property?
========================================= MODERATOR'S COMMENT:
That's not a bad definition at all. If you sell a home with a
refrigerator in it, the fridge is section 1245 property. The land is
Section 1231 property and land is not depreciable. The building itself
and all attached structures such as a deck would be 1250 property. Assume
for your case here that Structures = Section 1250 property.
But that may not solve your problem. You might be trying to figure out
where to calculate and list the Unrecaptured Section 1250 Gain, and now
have to deal with an entirely more complicated topic! I'll leave this
for others to answer.
- posted 12 years ago