Posted on 09/11/2006 5:46:01 AM PDT by Rb ver. 2.0
"Beat me to it. My wife, the very-accomplished CPA, would probably leave out the "almost"."
When you are dealing with the IRS "almost" *always* applies. (Even if the IRS is wrong and you take it to court, what you save on taxes you spend on lawyers.)
"The guy has a good attitude about it, especially the part about enjoying it for 3 weeks."
If it sits on the market for a while, he may get to "enjoy" it a lot longer than he is planning.
He'll owe regular income taxes on the winning of the home, and capital gains taxes on the selling of the home. IOW, net zero left.........
Correct me if I'm wrong, but won't he also have to pay about a million in income tax on it for 2006? IIRC that kind of win is considered income.
I actually live here, Lake Lure, and can see this beautiful home on the side of the mountain across the lake. I took a tour of it, and it is really cool! Anyway, my wife has a friend that works for HGTV, and she told us that all 10 yearly winners of these dream homes have had to sell them.
... oh, and I forgot, He'll owe Property Taxes on the owning of the home.........
I'm sure the place is nice, but less than ten percent of the population could afford it once you consider taxes, utilities, maintenance, etc. Hope the guy at least makes a nice chunk of cash when he sells.
This the the same question people have been asking for the past 12 some years. This is about the 12th dream house HGTV has "given" away and not one single winner has been able to keep the house. The number one reason - TAXES!
Even though this year HGTV also included $250,000 from some mortgage company, the winner still cannot hold onto the house.
Maybe HGTV will learn with the next house, but I doubt it.
The capital gains only come into play if he sells it for more than the value at the transfer when he won it. If he sells it for less, IIRC he could show a capital loss. Although still having paid the initial income tax on it.
Why not offer something worth perhaps $450,000? Well, 450k in a "normal" market, not an insane one like CA or MA...
Anyway, that way, most people could *maybe* afford to actually keep it. Still a very nice home, but something people could actually keep.
How about a reverse mortgage? Or those all scams?
He'll have to sell it for at least the amount of "income taxes" he owes, plus some for the "property taxes". The HGTV "price" is way over-inflated, so he may not actually get enough in the sale to cover all the taxes........
I have a new 6500 square foot vacation home in the NC mountains on 42 acres and pay only $1645/annual in taxes.....
A reverse mortgage doesn't change that he owes almost a million in income taxes PLUS $20k yearly property taxes. It would be like bailing out New Orleans after Katrina with a sand bucket.
Doesn't he need to live in it for 2 years in order to sell it without paying horrendous capital gains taxes?
Light bulbs, towels, furniture, homeowners dues, landscaping,......
I could see that he'll be paying the gift tax on the assessed value, but if he takes possession and then immediately sells it at the assessment, there wouldn't be any capital gain. Would there?
Seems that accepting a gift of $3 million in fixed assets would itself leave you with a $900,000 tax bill, minimum.
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