Homeowner Capital Gain Exemption
In October 2002, my wife and I purchased a home(A) and stayed there as a homeowner occupied till June 2004. We rented it out and purchased another home (B) and stay in this home (B) till this June. If we sell the home(B), we will exclude up to $500k as capital gain. My question is if we move back to the first home(A) and stay for another 5 months to meet the 2 years homeowner occupied, could we get the homeowner capital gain exemption if we sell it end of this year or early next year?
No, you can only use the capital gain exclusion once every two years. If you have a second qualifying primary residence, you have to wait two years after selling the first property to use the capital gains exclusion again.
If you move back into home A in Jul 2006, you will not be eligible for the capital gains exclusion until June 2008 -- two years after the sale of home B.
Just a little tip you probably were not aware of. Because I only buy properties that are held in land trusts, they have already been converted to personal property which is not governed by mortgage law, but by the UCC. Thus, I only purchase personal property which is categorized by the IRS as a security and listed on my applications under stocks and bonds. You can obtain as many properties as you like this way without ever being considered a dealer.
Da Wiz
wiz - what was the name of that Land trust book you recommended a couple weeks ago?
New Kid,
Can you point me in the direction of the IRS pub that discusses Self Employemtn Income tax vs. Ordonary Income tax?
Thank you,
Loafie6
Quote:
On 2006-05-17 11:25, loafie6 wrote:
New Kid,
Can you point me in the direction of the IRS pub that discusses Self Employemtn Income tax vs. Ordonary Income tax?
Thank you,
Loafie6
Newkid is correct. See IRS Publication 334, pg. 42 from http://www.irs.gov. You will be subject to SE taxes AND ordinary income taxes. The way to avoid this is to rehab. the property and rent it out at FMV for 1 year and THEN sell the property. Then you can limit your taxes to long term capital gains rates plus some depreciation recapture at 25% (minimal). Good luck!
[ Edited by finniganps on Date 05/17/2006 ][ Edited by finniganps on Date 05/17/2006 ]