Combining 1031 With The 121 Exemption
Just read a book on 1031 exchanges by Gary Gorman.
He states that if both 1031 and 121 are used on the same piece of property, the property must be held for a minimum of five years. A fairly new change by Congress, he says. I had always heard differently on this forum. Can anybody verify this? Also, is there a limit on the number of people that can claim the $250K
exemption on the same residence? Can my two sons,
my two friends and I all be on the title, all live in the house for two years, then each claim the $250K exemption on our individual tax returns(for a total of $1,250,000 tax exempt)? Thanks for any advice.
tax exempt)
Quote:Just read a book on 1031 exchanges by Gary Gorman. He states that if both 1031 and 121 are used on the same piece of property, the property must be held for a minimum of five years. A fairly new change by Congress, he says. I had always heard differently on this forum. Can anybody verify this? The five year rule, a recent tax code change, applies to property that was initially acquired with a 1031 exchange, then converted to a primary residence. Five years of ownership is required for this situation to become eligible for the 121 capital gains exclusion.
For property that was initially acquired as your primary residence, then converted to a rental property, the two year rules are still in effect for Section 121. If the capital gains exceeds the Section 121 exclusion, then the excess can be deferred in a Section 1031 exchange.
Quote:Also, is there a limit on the number of people that can claim the $250K exemption on the same residence? Can my two sons, my two friends and I all be on the title, all live in the house for two years, then each claim the $250K exemption on our individual tax returns(for a total of $1,250,000 tax exempt)? No limit I am aware of. Each titled owner must both own and occupy the property as a principal residence at least two of the five years prior to sale to qualify for the capital gains exclusion.
Is this a hypothetical question, or a real situation where you have $1.25MM in capital gains if you sell your primary residence? I only ask because if this is a real situation, with a number this large, I would not rely on nor act upon any information I obtained from an anonymous source in a web forum. Consult a licensed tax advisor for a professional opinion.[ Edited by NewKidinTown2 on Date 08/23/2005 ]
How do you propose to get paid?
One more thing. The house is in estate.
There is no mortgage.
My name is not on the deed or the title.
Yes this is risky. I know.
But lets pretend this is all going to go well...
How do you propose to get paid?
Like NewKidintown2 said,
How do you propose to get paid?
Does the contract give you the right to sell the property?
Do you have power of attorney to sell the property?
OK, so you propose to get paid "at the settlement table". At settlement your $120K (or $140K from your earlier post) assignment fee will appear on the HUD-1 showing how all funds involved in the transaction were disbursed, and, the settlement attorney will give you a 1099 for that amount. The 1099 is also sent to the IRS, so they also have a record of your income.
[ Edited by NewKidinTown2 on Date 08/19/2005 ]
NewKid,
The 100k include the reserve fund? The $1500 a unit sounds right for the paperwork.
Did your state require x% of assessed value for the reserves? or appraised value?
thx..ron