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 » From: Albuquerque, NM Dear TaxMama: Two questions ... 1) I sold an office building in which I was a limited partner. The gain was almost $ 200,000! Is this taxed as a capital gain or an ordinary income? I was not an "active" participant .... just an investor in the building. 2) I sold a rental property that I owned for almost 20 years. I doubled my money, and realize I will have to recapture depreciation and pay taxes on the entire amount of the sale. Now, is this all taxed as capital gains? Ordinary income? I was active in managing the rental property, collected rents, and filed the appropriate tax forms. Judy Dear Judy, Well, at least it looks like you're making money. Real estate is definitely the way to go. The gains on both properties will be handled, essentially, the same way. As a limited partner, you're still going to pay taxes on the profits of the rental real estate the same way anyone would. You will pay taxes at the special capital gains rate of 25% Federal, plus your state rates. (The 'active' rules just let you write off losses during the life of the partnership, up to $25,000 per year for all properties combined.) Remember one thing, if you have 'suspended losses' on either of the investments (losses you couldn't deduct because your income was too high all these years), they will all become deductible when you report the sale of the property. That often helps reduce the tax bite. You will want a Tax Pro who understands rental real estate sales to help you with the tax return preparation. Passive Loss carryforwards can be a real pain to compute over that long a period of time. Best wishes, Eva Rosenberg Your TaxMama  |
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