October 2009 Newsletter
This month's Newsletter is dedicated to a follow-up to the teleclass:
"Splitting
Rental Properties in Divorce" with Carol Ann Wilson and
Gail Heinzman, CPA. There was so much information on that call.
If you missed it, you can still order a download here:
http://www.fdadivorce.com/shop/teleclass/tc03e.html
AND you can get
1 hour of CE credit with the CFP Board of Standards.
Table of Contents
1 New tax law regarding turning a rental into a residence
2. New Product - Divorce Survival Kit™
3. Free Teleclass
4. Divorce Funny
5. Thought for the Day
1. New tax law regarding turning a rental into
a residence
The tax law, which took effect on January 1, 2009, affects the
amount of exclusion at the time of sale of the property. According
to Code Section 121(b)(4)(A), gain will be allocated to periods
of nonqualified use based on the ratio which the aggregate periods
of nonqualified use during the period the property was owned by
the taxpayer, bear to the period the property was owned by the taxpayer.
For these purposes, nonqualified use begins on January 1, 2009.
Sound confusing? Let's look at some examples.
Case Study #1
Sheila bought a rental property for $400,000 on January 1, 2010.
Two years later (January 1, 2012), after her divorce was final,
she moves into the rental property and makes it her primary residence.
During the 2 years it was a rental, she claimed $20,000 of depreciation
deductions. Two years after she moved into it (January 1, 2014),
she sells the property for $700,000.
Sheila has to recognize the $20,000 of gain attributable to depreciation.
Of the remaining $300,000 gain, 40% of the gain (2 years divided
by 5 years), or$120,000 is allocated to nonqualified use and is
not eligible for the exclusion. The remaining gain of $180,000 is
excluded from gross income.
Case Study #2
Kevin bought a rental property for $200,000 on January 1, 2010.
Two years later (January 1, 2012), Kevin moves into the rental property
and makes it his primary residence. Two years after that, Kevin
sells it for $900,000 ($700,000 gain). The amount of gain attributed
to the nonqualified use of the property is $350,000 (2 divided by
4 times $700,000). Kevin will also have to pay tax on gain attributable
to depreciation.
Case Study #3
Charley buys a house to live in on January 1, 2010 for $400,000.
In 5 years (January 1, 2015), he moves to another city and rents
out his house to a friend. Five years after that (January 1, 2020),
he moves back into his house. Ten years after that (January 1 2030),
he sell his house for $800,000 ($400,000 gain). So, 25% of the gain
(the 5 years it was used as a rental divided by 20 years of owning
the property) is for nonqualified use. Of the remaining $300,000
gain, which relates to the period when it was his primary residence,
the maximum amount that qualifies for exclusion is $250,000.
2. New Product - Divorce Survival Kit™
My new product is finally ready! To find out more about the Divorce
Survival Kit™, go to
www.DivorceSurvivalStore.com. I personally guarantee that your
clients will save thousands of dollars in your divorce as a result
of having the information that they receive in the Divorce Survival
Kit.
3. Free Teleclass
I will also be hosting a FREE teleclass for your clients who are
going through divorce on Tuesday, Nov. 10. It is called "5
Ways to Survive Your Divorce Financially." To
enroll, click here.
And in both the Divorce Survival Kit and the Free Teleclass,
I promote you, the Real Estate Divorce Professional!
4. Divorce Funny
Question: What food most often leads to divorce?
Answer: Wedding cake!
5. Thought for the Day
Goals are dreams with deadlines.
---Unknown
Click here to read our previous
newsletters
|
