My last property I purchased for 153k just sold for 198k. It may sound like a good investment, but it turned out to be a nightmare. Long story short, after rehab and all expenses, including realtor commission we lost 600 bucks >:(
How does capital gains tax work on a gross loss?
This was a property flip? If so, you have an ordinary income loss, not a capital loss. Use Schedule C to report all the financial details of your property flip and to take your loss.
It was a flip.
When does capital gains / losses apply then?
A property flip is a dealer disposition in the eyes of the IRS. Your property is considered merchandise to your property flipping business. As merchandise, your sale profits are taxed as ordinary self-employment income (not capital gains) and you may also be liable for payroll taxes on your self-employment income.
In the real estate context, capital gains tax treatment would be applied to property held for investment use. The IRS defines investment use as property held primarily for the production of income (rental use) or for future appreciation.