Property Gains Tax
aloha,
i purchased a condo 14 months ago and i would like to sell and avoid capitol gains..someone told me if i rolled over all my profits into the purchas of my next home i can avoid the ****Must Reach Freshman Investor status before posting URL's*** cant find this expemtion in ****Must Reach Freshman Investor status before posting URL's***an anyone help me out?
Nice to see a fellow hawaii...er. Check with a CPA about a 1041 exchange. I believe that is what it's called. you'll roll the profit into another deal and the tax will be deferred. Good luck.
I recently did a 1031 Starker exchange and have done quite a lot of research on this. All the IRS code I read said you have to have lived in the property for 2 of the last 5 years in order to avoid paying the capital gain. You should call the IRS directly, their tax folks can be very helpful.
Kahuku grad
Yes maia is correct it is a 1031 exchange (not 1041) and you do need to own the property for 2 years. Mahalo for the correction Maia and congratulations...Kahuku won the state football championship again! [ Edited by cmyke on Date 01/28/2004 ]
Sec. 1031. - Exchange of property held for productive use or investment
(a) Nonrecognition of gain or loss from exchanges solely in kind
(1) In general
No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment if such property is exchanged solely for property of like kind which is to be held either for productive use in a trade or business or for investment.
(C)
before the date 2 years after the date of the last transfer which was part of such exchange -
(i)
the related person disposes of such property, or
(ii)
the taxpayer disposes of the property received in the exchange from the related person which was of like kind to the property transferred by the taxpayer, there shall be no nonrecognition of gain or loss under this section to the taxpayer with respect to such exchange; except that any gain or loss recognized by the taxpayer by reason of this subsection shall be taken into account as of the date on which the disposition referred to in subparagraph (C) occurs.
You do have to hold for two years, but you don't have to live in an investment property. See:http://www4.law.cornell.edu/uscode/26/1031.html#FN1
[ Edited by wpruett on Date 01/28/2004 ]
mahalo to all of you for you kokua..
aloha