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Taxes Are Insidious Vicious and Disruptive Things
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Back in 1978 I bought a small (980 sq ft) two bedroom one bath frame house in Irving Texas. I was living in an apartment at the time and I thought that the house was a good investment and would gain in value. I paid $19,000 for the house and rented it out until my lease on the apartment expired and then moved into the house where I lived until 1987 when I moved out to the Banks of the Brazos River and it returned to being rent property. In 2004 I had some renters who damaged the house to some extent and it needed quite a bit of repair and I was having trouble administering and watching the property from 75 miles away so I sold it for $38,000 and carried the note on the house myself because it had a balloon payment provision which came due in 2006 and the buyer paid off the property at that time. Now I was well aware of the provision of the IRS Income tax code which provides for payment of tax on increase in capital gain and figured that I would have to pay income tax on the $19,000 "profit" or capital gain that I had made on that transaction. What I didn’t realize was that the government recovered all of the depreciation for the property that I had taken on my tax returns for the 26 years that I had owned it and charged me capital gains tax on that amount also. In other words I had to pay a capital gain tax on $34,800 rather than the gain of $19,000 that I actually received for the house.
Now my CPA is an expert at this sort of thing and I don’t doubt that he has properly interpreted the law and properly computed my tax but it leaves me moaning and groaning that there just ain’t no way to win. And there is about two and a half billion dollars of pork in the appropriation bill which Congress has passed and which Bush may veto for other reasons and I don’t like to think that the taxes I am being charged this year will go to build bridges to uninhabited islands in the Alaskan seas and to extend the commuter trains from Washington DC to West Virginia . Just as an aside the amount of county, school and city taxes on that little property increased by a factor of five during the twenty six years that I owned it and the insurance payments doubled.
There ain’t no way to win. I am going to lobby for anarchy.
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