Realized G/L For Vacation Property
Hi guys. I have a question pertaining to a vacation property owned in NJ that will be sold soon. Since the married couple 500K realized gain exemption tax law applies to primary residence, does it also apply to vacation homes? There has been no rental income or depreciation expense declared on this vacation property.
thanks
No, it has to be your principal residence to exclude the gain. If you decided to convert it to a rental and then sell it you could do a like-kind exchange into another rental property to defer the gain.
Heard of folks doing this a few times... If they do a 1031 exchange, rent it out, after lease expiration move in and live for 2 years or more and then take the $500k exclusion.
Quote:
On 2010-09-16 07:03, ddstew wrote:
Heard of folks doing this a few times... If they do a 1031 exchange, rent it out, after lease expiration move in and live for 2 years or more and then take the $500k exclusion.
The rules have changed on this - converting a rental property that was subject to a prior 1031 exchange and then moving in to claim 500k exclusion. I believe you have to live in the home 5 years before selling if the property previously was involved in a 1031 exchange...and then when you sell you must still recapture depr. expense from when it was a rental. Check with your tax advisor for additional details.
Thanks... It is always great to learn from the experiences of the posts on this site.
I too have resorted to doing my own taxes because simply it is of my own best interest to research and understand my situation and apply the tax codes to my benefit. The need to understand is before the year begins, so as to maximize all of the legal write-offs. Typical accountants and tax specialists apply their knowledge after the fact, the need in our business is to know before the year begins. So, I will probably continue to file the 20+ pages of tax return myself!
If you have always done your own taxes and are satisfied with the outcome, then why pay someone to do your taxes?
Unless you have a really complex tax situation that you have never encountered, a paid tax preparer is not going to do any better job preparing your tax return than you can do yourself, especially if you use tax preparation software such as TurboTax.
If you look behind the curtain, the expensive tax preparers use the same tax preparation software that you can purchase at your local office supply store or warehouse club.
Quote:
On 2010-09-14 13:36, NewKidInTown3 wrote:
If you have always done your own taxes and are satisfied with the outcome, then why pay someone to do your taxes?
Unless you have a really complex tax situation that you have never encountered, a paid tax preparer is not going to do any better job preparing your tax return than you can do yourself, especially if you use tax preparation software such as TurboTax.
If you look behind the curtain, the expensive tax preparers use the same tax preparation software that you can purchase at your local office supply store or warehouse club.
Most tax prepares use professional tax software (eg. Lacerte or CCH Prosystems) that allow the tax preparer to make adjustments based on an individuals specific facts that may or may not be properly covered in Turbotax. I think Turbotax is great for many people and use it myself, but I think a good tax advisor can make a huge difference in your tax situtation and liability in many cases.
finniganps,
Guess who maintains and markets Lacerte? It is Intuit, the same folks who sell TurboTax to the individual taxpayer.
A couple years ago, I got an evaluation copy of Lacerte and realized that it was just TurboTax for the professional tax preparer. I could discern no difference in the outcome for an individual tax return prepared by Lacerte and by TurboTax.
Lacerte is more comprehensive, in that only one package is needed for the full range of personal and business federal returns that the typical paid tax preparer might see in his practice, whereas two personal TurboTax packages are needed for the individual preparing a personal tax return (1040) and a business or trust return (1120, 1120S, 1041, or 1065).
My topic was "how to find a good tax advisor", which does not necessarily mean a tax preparer.
I recently purchased a good book on the topic, "Aggressive Tax Avoidance for Real Estate Investors". Although it is written primarily for those with a buy and hold strategy, I found it helpful. Basically, he recommends not to blindly trust a tax advisor and explains this reasoning.
Books are great, in that they tie tax laws together with investor advise, but the best source is the IRS publications dealing with your specific situation. Most are short reads, I recommend just before bed, as you will easily fall asleep after reading one...