Check Your Understanding-Answers
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Under what circumstances can a loss on the sale of a personal residence be deducted from income taxes?
Normally, under no circumstances. But if the property is converted to an income-producing rental, then a loss on the subsequent sale could be deducted.
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What items can an owner of an income-producing property deduct that an owner of a personal residence cannot?
Operating expenses and depreciation.
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What are the capital gains exclusions associated with the sale of a personal residence?
A single seller can exclude up to $250,000 of gain and a couple can exclude up to $500,000.
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What is important for a broker to remember about the Foreign Investment in Real Property Tax Act?
The buyer is responsible for withholding 15% of the sales price if the seller is a foreigner and the home is priced over $300,000. If the money is not withheld, the buyer and broker are equally responsible and the broker could end up paying the entire unpaid taxes due.
