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Getting the Shaft on REAL ESTATE in MEXICO

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Post by Jim W Sun Aug 09, 2015 4:00 pm

We sold our home @ Lakeside, and are closing the 20th of August. Lived in our home pretty much full time (9 years) till I got diagnosed with the big C!

Now Notario #2 (he is good) tells me I will owe approx. 100,000pesos for capital gains. We paid $250k US, wrote a check to a US Bank, and assume same will occur @ closing. We put in $40k on improvements and sold for $220,000. Now Mexico is basing the tax is that the Peso is @16.5, and I bought when the peso was @ 10.5.

We were pretty naïve when we moved here. Hired a contractor, installed a heated pool, didn't discover 4 years later, contractor didn't get and provide facture.

Bottom line, I had no idea the peso puts on sellers! Who would expect a loss when you sell to equate to Capital Gains tax.

Just frustrated.......time for us to get out of DODGE.....LOL Basta
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Post by helohfe Sun Aug 09, 2015 6:48 pm

Jim..Your post made my stomach ache..I would check around if only for sanity..The purchase price was in US dollars and sold in US dollars with you incurring a loss independent of improvements. It seems like the R.E. process is flawed. Since the valuation listed in the deed is in peso's with the then existing exchange rate your sale orice should be corrected taking in the adjusted purchase price to the new peso valuation to keep the figures equitable. I would at least talk with Spencer and another Notario..Any seller from here on out is going to be screwed if this is in fact correct....

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Post by Jim W Sun Aug 09, 2015 6:57 pm

helohfe wrote:Jim..Your post made my stomach ache..I would check around if only for sanity..The purchase price was in US dollars and sold in US dollars with you incurring a loss independent of improvements. It seems like the R.E. process is flawed. Since the valuation listed in the deed is in peso's with the then existing exchange rate your sale orice should be corrected taking in the adjusted purchase price to the new peso valuation to keep the figures equitable. I would at least talk with Spencer and another Notario..Any seller from here on out is going to be  screwed if this is in fact correct....



helohfe, We have already started the process with Spencer! I am sharing this for newbies, plus others, as losing money on the investment, is one thing.......Paying capital gains on a loss is bullshit!
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Post by Vandre Sun Aug 09, 2015 7:19 pm

I thought I understood that if you sell 1 primary residence in a 5 year time span, you are exempt from capital gains.  I do think there was/is a max Peso Gain limit for this exemption but don't remember how much.  I also thought that an annual inflation percentage was also factored in and deducted from any gains @ closing.  I feel for you Jim, it's a minefield out there!

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Post by Jim W Sun Aug 09, 2015 7:31 pm

Vandre wrote:I thought I understood that if you sell 1 primary residence in a 5 year time span, you are exempt from capital gains.  I do think there was/is a max Peso Gain limit for this exemption but don't remember how much.  I also thought that an annual inflation percentage was also factored in and deducted from any gains @ closing.  I feel for you Jim, it's a minefield out there!


Thank you Vandre!
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Post by hockables Sun Aug 09, 2015 7:33 pm

The Realtor & MLS might price the product in US Dollars... this is Mexico, and the transactions were done in Pesos... Beer
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Post by Jim W Sun Aug 09, 2015 7:34 pm

Jim W wrote:
Vandre wrote:I thought I understood that if you sell 1 primary residence in a 5 year time span, you are exempt from capital gains.  I do think there was/is a max Peso Gain limit for this exemption but don't remember how much.  I also thought that an annual inflation percentage was also factored in and deducted from any gains @ closing.  I feel for you Jim, it's a minefield out there!


Thank you Vandre!  


I can't believe anyone, in any country, would pay capital gains on a loss!
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Post by CanuckBob Sun Aug 09, 2015 7:37 pm

And we aren't all Americans with the 16.5 to 1 dollar...... Beer

Seriously though I would check with Spencer on this one or with another Notario. Something doesn't sound right. Do you have a permanente visa Jim?
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Post by Jim W Sun Aug 09, 2015 7:47 pm

CanuckBob wrote:And we aren't all Americans with the 16.5 to 1 dollar...... Beer

Seriously though I would check with Spencer on this one or with another Notario. Something doesn't sound right. Do you have a permanente visa Jim?


Yes I am Permanente! Miss ya bud. Deb will arrive the 12th.....thru the 21st. If necessary, I will fly in for closing. Still bureaucratic bullshit!
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Post by CanuckBob Sun Aug 09, 2015 8:12 pm

Being that you are permanente and had the house for over 5 years, I didn't think there should be any capital gains unless something has once again changed.

It does need to be your residence too. Do they somehow know you haven't lived in it for a few years?
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Post by Canmex 87 Sun Aug 09, 2015 8:20 pm

Could this have anything to do with the value declared at the time of purchase?

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Post by SunshineyDay Sun Aug 09, 2015 8:33 pm

Jim did you get stuck with paying the "Finquito"? Buyer beware here.


Last edited by SunshineyDay on Sun Aug 09, 2015 8:39 pm; edited 1 time in total

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Post by solajijic Sun Aug 09, 2015 8:37 pm

We just had a transaction on a property that was done with a very very low purchase value. It does seem unfair. I happen to agree with the peso value adjustment thought but then I am not in charge.

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Post by SunshineyDay Sun Aug 09, 2015 8:40 pm

You have to be careful what you say---even here!

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Post by Jim W Sun Aug 09, 2015 8:57 pm

CanuckBob wrote:Being that you are permanente and had the house for over 5 years, I didn't think there should be any capital gains unless something has once again changed.

It does need to be your residence too. Do they somehow know you haven't lived in it for a few years?


Only if you turned me in LMAO!



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Post by Jim W Sun Aug 09, 2015 9:02 pm

CanuckBob wrote:Being that you are permanente and had the house for over 5 years, I didn't think there should be any capital gains unless something has once again changed.

It does need to be your residence too. Do they somehow know you haven't lived in it for a few years?

Has nothing to do with it Bob. This is a serious issue......you buy in Mexico...and get fucked! Been there done that, lost my butt!
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Post by sir Sun Aug 09, 2015 9:18 pm

Been a topic for one to two years - why didn't you pay attention? Didn't your good buddy F. Lee Bailey warn you?

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Post by brigitte Sun Aug 09, 2015 10:14 pm

so you bought a house for 2.625 000 pesos (at 10.5) and sold it at
3 630 000 pesos (at16.5) you are over the 2.5million pesos so you pay capital tax and did not pay with facturas so cannot deduct your remodelling. According to the pesos figures you made 1.million pesos so you pay capital tax on that. Is that the logic?
I would think that many people will have the same surprise as you had especially when the value of the houses was low balled on the deed back whenever and few have facturas and finiquitos for the work they did.

You have to look at it as having enjoyed the place for 5 years and move on..nothing else to do.

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Post by WillieRae Mon Aug 10, 2015 7:10 am

It has been my personal experience both as a realtor in Sinaloa as well as selling our home in June of this year, that the ceiling for triggering capital gains was 3,500,000 mx....anything that was gained over that amount was taxed as capital gains. Of course, like all things here-that can change. And yes, you can get caught in the exchange rate of the day. A lot will depend on how you recorded the amount paid at the time of purchase. It used to be that you could record the purchase at the appraised value which was usually a lot less than the sale price, thus saving the buyer as fair amount of acquisition taxes...the catch is on the sale...you get caught up for cap gains. Now most notarios won't close a sale that way.
It pays to consult a GOOD notario about All aspects of property ownership in Mexico....purchase costs....sales costs....tax implications, etc.

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Post by CanuckBob Mon Aug 10, 2015 7:44 am

So what was all the talk in the past about not paying capital gains if you lived in a house for at least 5 years and had an FM2 (now a permanante) visa?
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Post by solajijic Mon Aug 10, 2015 7:56 am

Tht still stand the 5 year occupancy as a primary home. There is a threshold also. So again the chat with the people who know whats what and how to minimize your problem or prevent one from occuring.

The tactic in 2004-5-6-7 was to put a ridiculously low value on the property. Those owners who agreed to that are now sellers who are paying.



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Post by Sideways Mon Aug 10, 2015 8:49 am

Friends went throught this recently. They owned 6+ years here. But also owned a home in the US. They were made to pay capital gains because of that, or at least that's what they understood. If they had not owned a home in US, they would have been exempted from capital gains. Even though they spent 8 months a year in Ajijic, they were toldprove that Mexico was their primary Fiscal residence (term used by Notario and realtor), that they should have filed Mexican tax returns even if no tax was due. They are retirees with US pensions/investments, but the Notario said without Mexican tax returns he had to assess capital gains. It was significant due to low-ball on original deed when that was being done.

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Post by CanuckBob Mon Aug 10, 2015 9:06 am

Thats good to know. When we bought a few years ago the notario had us pay the taxes on the listed price which was more than what we actually paid. He said that it would be beneficial when we sold. I didnt really understand why at the time but I do now.
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Post by brigitte Mon Aug 10, 2015 11:45 am

Low balling the prices on the deed goes back a whole lot longer than 2004.

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Post by RVGRINGO Mon Aug 10, 2015 12:04 pm

It is also a different ballgame if the property was rented out.

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