Capital gains taxes on homes and income-producing property differ

Q:

I am very confused about the capital gains tax. We own a three-decker house; it was a family-occupied building, so the rents were below market value. We do not live there; we have a single-family home. 

 I thought that you did not have to pay capital gains tax on any home sold. But my friend said that is not true. Would we have to pay a capital gains tax? Would that be 15 percent or 25 percent?  My husband gets a pension and I get social security (not much). 

A:

Now, I’m confused. Are you planning on selling the three-decker or your single-family residence? The capital gains tax rules are different for the two properties.

There is an exclusion against capital gains taxes available to homeowners on the sale of a personal residence.

The seller must have lived in the property as his/her personal residence for two out of the last five years.

If you can meet this residency requirement, single taxpayers can take an exclusion of up to $250,000 on the gain realized in a sale. Married couples, filing jointly, can exclude up to $500,000 against capital gains taxes.

There is no exclusion available to sellers of investment properties, such as your three-decker. Any capital gains you realize on the sale of this property would be taxed at 15 percent, and 5.3 percent at the state level.

Q:

Who is responsible for tree branches that hang over a fence?

A:

This is a common question. I assume the fence you are referring to represents the property line between two property owners.

Having made that assumption, in general, the landowner on whose lot the tree is growing will be liable for any damages resulting from branches that overhang the adjoining owner's property.

Just to be contrary, however, some cases impose liability for the overhanging branches only if the owner of the land on which the tree is growing, or a former owner of that land, actually planted the tree. In other words, the tree did not grow there naturally, but rather was planted.

One further note: The owner of the land on which the branches encroach has the right to cut off the encroaching branches.