Jewish World Review Oct. 3, 2000 / 4 Tishrei, 5761
Not paying taxes on interest from house sale
DEAR BRUCE: We would like to sell our home and move into our smaller summer house. We would like to put the money we receive from the sale of this house into an account, so that if we decide to buy another home in the future we won't have to pay taxes other than the interest earned. What can you tell us about this idea? -- B.P., Knoxville, Tenn.
DEAR B.P.: There is nothing to worry about. Since you are selling your principal home, there are no taxes to a couple unless your profit is over $500,000, a very unlikely circumstance. Under the old laws, there was a one-time exemption and provisions for roll-overs, none of which are applicable today because they are totally unnecessary. Take the money and use it any way you please.
DEAR BRUCE: We are a couple in our 80s and have accumulated $700,000, which is currently in CDs. We are having a difficult time keeping track of our money. We were wondering if we could work out something with the trust department of our bank so that the money would come to us in our lifetime, and then to our children during their lifetime, and to a charity of our choice upon our children's demise. Does this make sense? -- L.K. Burton, Mich.
DEAR L.K.: It makes sense to me. The trust department can handle this kind of transaction, or alternatively a law firm specializing in trust accounts could handle it. I would get to it, however, because this is very much dependent on both you and your wife being of sound mind and being able to handle your own affairs when this decision is made.
DEAR BRUCE: We have a family sub-chapter S corporation, which owns our dairy farm. The base cost of the property is about $200 per acre. We are now considering selling off 240 acres at $1,400 an acre. Is there some way that we could trade this, or buy another farm so as to avoid the capital gains? -- P.A., via e-mail
DEAR P.A.: If the sale takes place and you keep the cash, you will owe the capital gains, which will probably be 20 percent. I don't see any advantage in your buying another farm other than postponing the taxes. If that's the case, then why bother selling the one you have? Sooner or later, someone is going to have to pay the capital gains on this investment, and it would appear that they will be
Send your questions to JWR contributor Bruce Williams by clicking here. (Questions of general interest will be answered in future columns. Owing to the volume of mail, personal replies cannot be provided.) Interested in buying or selling a house? Let Bruce Williams' "House Smart" be your guide. (Sales of the book help fund JWR).
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