Anybody here have knowledge about taxes owed on a real estate sale?

A friend of mine just sold a vacant lot for $98k.  She used to have a home on it which was destroyed in Hurricane Ivan.  She and her husband had bought the home and property for $85,000 about 35 years ago.

I told her she would be taxed on the gain which is the difference between what was paid for the lot and what she sold it for which would mean she would be taxed on a $13,000 gain.

BUT,  two people involved with the closing told her she would be taxed on the whole amount of the sale.

Questions

1.  Who is right,  me or the real estate people involved in the closing?

2.  Will she be taxed at the capital gain rate or the regular income tax rate?

Bob wrote:A friend of mine just sold a vacant lot for $98k.  She used to have a home on it which was destroyed in Hurricane Ivan.  She and her husband had bought the home and property for $85,000 about 35 years ago.

I told her she would be taxed on the gain which is the difference between what was paid for the lot and what she sold it for which would mean she would be taxed on a $13,000 gain.

BUT,  two people involved with the closing told her she would be taxed on the whole amount of the sale.

Questions

1.  Who is right,  me or the real estate people involved in the closing?

2.  Will she be taxed at the capital gain rate or the regular income tax rate?

She needs to speak with a real estate attorney before doing anything.

Just use TurboTax and they'll guide you through all this stuff.

Nobody can answer this question without understanding the actual basis of the property. It could have been depreciated, It could have been like kind exchanged when buying the property which would also impact the basis. An insurance payment on the loss can also impact the basis. Turbo tax can be a great help, but a person needs to get the basis of this property to make any determination of the capital gains due. Guessing on the basis is a fool's errand.

2seaoat wrote:Nobody can answer this question without understanding the actual basis of the property.  It could have been depreciated, It could have been like kind exchanged when buying the property which would also impact the basis.  An insurance payment on the loss can also impact the basis.  Turbo tax can be a great help, but a person needs to get the basis of this property to make any determination of the capital gains due.   Guessing on the basis is a fool's errand.

Excellent advice.