Trade To Avoid Capitol Gains?
I want to sell a rental but not if I have to pay alot of tax. I was wondering if I do an even trade on a building a church owns that they are no longer using (it can fixed up as a residence) what will happen with the building I am acquiring? Can I sell this building I get from the church right away or can I then live in it for two years and sell it wilh no capitol gains tax? 
[ Edited by justme on Date 01/11/2004 ]
Check out all the posts in this forum that talk about a 1031 exchange.
Quote:I was wondering if I do an even trade on a building a church owns that they are no longer using (it can fixed up as a residence) what will happen with the building I am acquiring?You are describing the mechanics of a simultaneous exchange. There are certain rules that govern a tax deferred exchange. One is that only like-kind property can be exchanged. If you are trading in your investment property, you must get an investment property in return. The building you receive must be used for a valid investment purpose such as production of income (rental, for example).
Quote:Can I sell this building I get from the church right away Yes, you can sell this building right away and pay taxes on the sale proceeds. Your cost basis in the new building will be the same cost basis you had in the rental property you gave up.
Quote:can I then live in it for two years and sell it wilh no capitol gains tax?Yes, you can live in it for two years and sell it with no capital gains tax. However, the property you gave up in exchange for this building will be considered sold for tax purposes and you will have to pay the capital gains taxes on the sale. The property you acquired will be considered "purchased" with the proceeds from the "sale".
The bottom line is that your personal residence can not be on either end of a qualified tax deferred exchange. If it is, then the exchange is disqualified and the transactions are treated as taxable events.
Consult a professional tax advisor licensed in your area for specific details.
there is of course a fudge, but that requires a very good man to work it out. A 1031 does not excuse the tax it is merely delayed.
Get your super qualified CPA Tax type person to advise you. There is a game you can play but it is on the edge and you may not wish to play the game. I did it once and I screwed it up big time and had to pay the tax. Made me cry. So with great care.
The Church into a residence oh my, now that would be fun to do. I have always wanted to do that. I also want to do a Fire Station, but so far no luck, but I keep hoping.
Cheers Lucius
i'm currently renting out a condo (it was not a 1031). i guess i'll be taking depreciation on it too.
if i move into it next year, what are the tax consequences when i sell it. after living in it for 2 years.