[an error occurred while processing this directive] [an error occurred while processing this directive] January 2003   [an error occurred while processing this directive] [an error occurred while processing this directive]   Capital Loss on Residence
  Worthless Stock
  Tax-free Exchange with Related Party
  Sale by Irrevocable Trust
[an error occurred while processing this directive][an error occurred while processing this directive] [an error occurred while processing this directive] We moved out of a home we owned and were unable to sell it for 2 years so we rented it for a short period of time. We expect to sell the home at a loss and meanwhile, have paid mortgage interest, taxes and insurance on a vacant house. Can I claim a loss? [an error occurred while processing this directive] It depends on the "character" of the property at the time of sale, a determination that is made by examining all the facts and circumstances. If it was your residence, then it is considered personal property and you cannot claim a capital loss on the sale. If the property was converted to rental property, then you are entitled to claim a capital loss on the sale. Also, with rental property, you are entitled to depreciate the property and take deductions that otherwise are not allowed, such as repairs. With either characterization, the interest paid on the mortgage should be deductible to you. [an error occurred while processing this directive] Tax Prophet's Tax Class on Principal Residence Exclusion [an error occurred while processing this directive] [an error occurred while processing this directive] [an error occurred while processing this directive] [an error occurred while processing this directive] How do I claim an investment loss for a stock that lost its value during the time I held it? [an error occurred while processing this directive] If you have evidence that your stock is actually worthless, then you can claim a loss; however, if the stock has the ability to rebound in price, then you need to sell it to claim your loss. If you sell it, do not repurchase it without understanding the "wash-sales" rules; otherwise, your loss may not be recognized for tax purposes. Generally, under the wash sales rules, you may sell stock at a loss for tax purposes and reacquire the same stock, provided you wait at least 31 days after the sale. Note: You can sell your stock in one company and purchase stock in a similar company (or mutual fund) without running afoul of the wash sales rules. [an error occurred while processing this directive]Tax Prophet's Tax Class on Investments [an error occurred while processing this directive][an error occurred while processing this directive][an error occurred while processing this directive] [an error occurred while processing this directive] I own investment property which I am in the process of selling. If I exchange the property with my mother, will the like-kind exchange rules of IRC Sec. 1031 apply? [an error occurred while processing this directive] Yes, although IRC Sec. 1031(f) restricts exchanges between related parties. If you exchange property with your mother and she sells the property within two years, the original exchange transaction will be considered a sale by you and not an exchange between you and your mother. For instance, suppose your property has a $100,000 gain and you exchange it for property held by your mother. If your mother sells the property acquired from you within two years, the transaction will be considered a sale by you of your original property and you'll pay tax on the gain. Once the two-year period under IRC Sec. 1031(f) expires, a sale by your mother will result in a taxable transaction to her, not you. [an error occurred while processing this directive] Tax Prophet's Tax Class on Real Estate [an error occurred while processing this directive] [an error occurred while processing this directive] [an error occurred while processing this directive] [an error occurred while processing this directive] My in-laws own rental property through an irrevocable trust and want to sell the property. Can they sell the property and keep the gains in the trust without incurring a capital gain? [an error occurred while processing this directive] No. All taxpayers, including revocable and irrevocable trusts, pay taxes on any gains arising from the sale or disposition of an asset, such as real estate. A revocable trust's taxes are usually paid by the settlor under the grantor trust rules. A taxpayer may avoid paying taxes on the disposition of property by engaging in a tax-free exchange under IRC Sec. 1031. [an error occurred while processing this directive] Tax Prophet's Section on Estate Planning [an error occurred while processing this directive] [an error occurred while processing this directive] [an error occurred while processing this directive]