From: Fayetteville, NC

Dear TaxMama,

First, I love your newsletter!

I bought some undeveloped timber land about 5 years ago.  My reason for buying the property was to have a place to hunt, not for investment potential.

Well, it turned out to be a great investment anyway.  This year I sold the property and made a profit of about $30,000. 

Would this sale be a capital gain/investment gain?  If so, would the investment gain make me ineligible for child tax credit and earned income credit?

If so, could I get around this by selling some stocks that would equal a $30,000 loss?

Thank You

Happy about the profit either way!

Kevin

 

 

Hi Kevin,

Well done!

Clearly, a man with excellent taste! Isn't it nice to have hobbies that end up being profitable?

Sure, the sale is a long-term capital gain.

And if you have stocks that you can sell at a loss and cash out of them, this would be a good time. You can offset the gain that way, if you have enough losses.

Whether or not the profit will cost you your child tax credit depends on how high the rest of your income is. If this pushes your joint income over $110,000....(or $55K separately), you actually could lose that credit. So, it would be worthwhile to generate some stock losses to bring things back into control.

As to the Earned Income Credit...well, with this kind of a sale, you'll probably lose that entirely.

Have you tried to estimate your taxes to see where you stand?

You can use the free estimator at TaxBrain.

It's really kind of a kick.

Best wishes,

Eva Rosenberg, MBA, EA