Legal Question in Tax Law in New Jersey

Capitol Gains Tax for my mom?

First, let me thank you for helping people like me. It is very much appreciated.

My mother sold her house in New Jersey last October and moved out to Missouri. She bought a new house with her profit from her old house. Now she tells me that she has to pay capitol gains tax. She's freaking out because her savings is dwindling down to nothing. At 72 years of age I would spare her anymore problems that she has to deal with.

She paid cash for her new house ($165,000) in Missouri.

Here are the figures:

$359,00 - Sale of house

$48,000 - Existing mortgage

$4,500 - Cost to sell her house

------------------------------------------------

$306,500 - Profit

- If she's allowed $250,000 (she's single) then she's left with $56,500 that is taxable?

- At what rate is she taxed?

- Are there any deductions that she's missing? She took out a home equity loan for $50,000 years ago to improve the house but it's been paid off for a while now. Shouldn't this count?

- If all is lost, what are her taxes on $56,500?

Thank you very much for your time...


Asked on 2/15/06, 11:29 am

1 Answer from Attorneys
Kreig Mitchell Law Office of Kreig Mitchell LLC

Re: Capitol Gains Tax for my mom?

The only figure that you didn't provide is what your Mother paid for the old house. When you are trying to figure the capital gain on the sale of that house, you use this formula: amount realized - basis = gain (then you get to subtract off certain deductions and multiply it by the apropirate rate).

You listed the amount realized, but you didn't list the basis. Generally you will use the cost basis -- i.e., what your mother paid for the property. In addition, your mother may be able to increase her cost basis by adding any improvements (not repairs) that your mother made to the property and if she was married and her husband owned part of the house and has since passed away, your mother may get a stepped up basis in that portion of the house that was owned by her husband.

Your mother's accountant, tax preparer and/or attorney should be able to easily review the facts and give you a more specific answer.

Good luck.

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Answered on 2/15/06, 11:48 am


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