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The Record, Hackensack, N.J., Tax Mailbag Column.
Apr. 29--QUESTION: My partner and I bought a fixer-upper home as an investment. What will our tax obligation be upon sale?
What expenses can be deducted to reduce the taxable amount? We paid off a tax lien at the sale, and have spent money on materials and labor for the renovation.
--R.B., Hewitt
ANSWER: Assuming this fixer-upper is purely an investment and not your primary residence, you will be taxed on the sale of the house as a capital gain.
If you hold the house for more than one year, the sale will qualify for long-term capital-gain treatment. If you own the house for less than one year, the sale will be considered short-term.
Long-term gains receive preferential tax rates (currently a maximum of 15 percent), whereas short-term capital gains are taxes as ordinary income (currently a maximum of 35 percent).
Basically, you will recognize gain or loss based on the net difference between the sales ...
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