Income Tax On 2nd Home
I have a 2nd home (lake house) and am looking to "move up," meaning that I will be buying a more expensive lake home and selling the existing one. I expect to have a small profit in the sale of the existing lake home, and hate like the devil to have to pay capital gains tax on the small profit since I am buying another 2nd home and would like to roll the entire sale proceeds and profit in it. However, it appears to me that I wil be paying the cap gains tax as this is not my principal residence nor is it being held for investment purposes (thus no 1031 exchange). Any suggestions here?
Thanks.
Why not just take a loan out against the equity on your lake house and use that towards the bigger house, then rent out the smaller house (if it can be rented year-round, of course)? This way, you avoid taxes altogether.
According to Kleinrock's analysis, the gain must be included in income. Sorry, no suggestions here, just the facts I could find.
I personally like joefromphilly's advice...