Tax Basis of Income property

[bean29]

My inlaws own a duplex and would like to sell it.

It was their primary residence from 2000-2006 when they bought a single family home for themselves.  From 2000 - 2006 50% of the duplex was depreciated.

The duplex was then converted to a pure rental in 2007.  I am pretty sure the depreciation continued to be only 50% on their tax returns.  I don't think it affected their taxable income as they are retired and have not paid income taxes most years.  I understand the allowed/allowable issue, but just need a good source to figure potential tax on sale.

The duplex is not in a good rental area and has a low mortgage balance.  Their primary residence has a larger mortgage balance.  MIL would like to sell rental and take proceeds and pay off primary residence.

So.  If The purchase the duplex in 2000 for $178,000 and allowable depreciation is $70,111.  Basis is $178,000-70,111=$107,889 and then the federal capital gains tax rate is 25%?  So, expected selling price is less than they paid say $168,000-107,889=$60,111 gain on sale x 25% tax rate = $15,029 tax due to Fed?  Is my guestimate correct?

[rangerj]

If depreciation has not been taken on one of the units then amend all tax returns that have an open statute of limitations and claim the depreciation. If a loss results it can be carried forward, if a carry back is not advantageous. The loss can be carried forward for many years until used up. Do not forget selling expenses, e.g. realtors commissions, attorney's fees, closing costs, real estate tax proration, etc. Keep in mind there is a difference between an operating loss or positive income, and a capital gain or loss. Depreciation recapture may or may not apply. It would be a good idea to get a tax professional involved and plan for this transaction for the best tax advantage given the circumstances. Tax avoidance is commendable.

[bean29]

Yeah, I was kind of looking around on the local AICPA website, but most of the CPA's listed looked like huge firms, and this is a tiny personal return.  I also looked at the yellow pages online, but most of the CPA's listed were not on my side of town.  I was invited to join an association of Management Accountants by a former co-worker...I might reach out to him and see if he can give me a contact.