Legal Question in Real Estate Law in Massachusetts
Capital Gains and Seller Concession on P&S
If a seller gives a buyer's concession on a P&S, do they have to pay capital gains on the amount that they are giving back to the buyer at closing? For example, if the purchase price is $200,000 and the buyer asks the seller to change that price to include closing costs of $2,500 ($202,500) which will be given back to buyer/bank at closing, will the buyer have to pay capital gains on that money he gave back to the buyer at closing?
2 Answers from Attorneys
Re: Capital Gains and Seller Concession on P&S
A Concession such as you describe is generally considered a cost of the sale, and is deducted from the gross proceeds, just like a broker's commission would be.
You should confirm this with your tax advisor, also.
Re: Capital Gains and Seller Concession on P&S
Generally such concessions are viewed as a cost of sale just like an attorneys fee or brokerage fee, so the answer is NO it would not be subject to tax.
Moreover, provided you have lived in the home for at least 2 of the last 5 years as a priimary residence, you are entitled to a $250,000 deduction/exemption from capital gains on the sale, $500,000 for a husband and wife.
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