A friend listed a rental for sale with a local real estate agent. They talked with the sellers CPA and was assured the taxes would be around $50,000

The long term capital gains recapture on depreciation is $71,000. The California State Tax is around $70,000. The Federal Long Term Capital Gains Tax is around $110,000 and the Affordable Care Act Tax is around $20,000. That's around $271,000 in estimated taxes, a lot more than the CPA's estimate of $50,000.

My friend knowing that I've done dozens of real estate transactions and have experience dealing with exchanges, taxes and sales. My friend is hesitant to seek the advice from a different CPA. I've agreed to pay the cost of a second opinion if I'm wrong. But if his tax liability is over the $50,000, I'm off the hook. Still my friend wants to give his CPA a change to review my paper work going over the numbers.

So investors are too foolish to spend a few hundred bucks seeking the right answers to important questions.

Howard Hughes got the best people to advise him so he grew his inheritance from 4 million to 3 billion back in 1977. .

I don't see how the CPA could be that wrong. I mean, even if ignore ALL of the other taxes, there will always be the simple Long Term Capital Gains tax at either 15% or 20% depending on income level. So, if THAT ALONE is more than DOUBLE the estimate, then something just doesn't make sense with this story.

I mean, your friend by himself should be able to calculate just that PIECE and see that it is way over what his CPA said, right? Even without all of the other taxes.

Can you friend not even calculate 20%?

Again, something about this story doesn't make sense.

- John...

If a "single" person makes over $200,000, then they must pay a 3.8% Affordable Care Tax on the process over that amount. If a "couple" filing jointly makes over $250,000, then they must pay the 3.8% tax for amounts over that. If you are married but file separately, then you pay the 3.8% tax on anything over $125,000.

If I understand the picture the seller ( your friend ) consulted with his CPA and got expensive bad information. I could understand if the seller ( your friend ) got bad information from the buyer's CPA because the buyer didn't want to sour the deal.

If it was his CPA then I would fire the CPA immediately. He might have some resource with the state board of accountancy.

It just doesn't make sense. You don't need a CPA to calculate 15% or 20% and see that it is well above (DOUBLE) the estimate that the CPA gave. I mean, wouldn't he have at least said right there: "Wait - how does that make sense when 15% of BLAH is $110,000?"

Again, this story makes no sense. Even for someone that is bad with numbers and ignoring ALL of the taxes except for Capital Gains that everyone would be able to calculate on their fingers...

- John...

You think only mechanics can be incompetent?

Well, as I said, there HAD to be more to the story and there is. This isn't just some incompetent CPA giving the wrong numbers as originally implied. This was a CPA trying to do some tricks that he thought might work -- which is what CPAs try to do all the time.

In any case, it clearly isn't as simple as "CPA says it is $50k, but look at all of these taxes!" because the CPA was trying to reduce the profit itself -- thereby lowering all of those taxes.

I'm not saying he can do it or anything -- he still might be crazy and wrong -- but there was clearly more to it.

- John...

fred: To be fair, with 2018, there are going to be a lot of "mistakes" that come even from competent CPAs. Even on this forum, we can't get two experts to agree on the new tax laws!

So, yes, 2018 is going to be crazy -- but more because of poor guidance from the government, not because of bad CPAs (unless something changes soon -- which, hopefully, it does).

- John...