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daveg
Investor/Rehabber
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Defer Capital Gains Tax
Monday, August 20 2007 09:50 AM
Can I get some info on using the strategy of living in an investment property for 2 of the most recent 5 years as your primary residence in order to eliminate the cap gains tax on the first 250k of appreciation?
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Marty Couch
Investor
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Re:Defer Capital Gains Tax
Monday, August 20 2007 04:39 PM
Hey Daveg,
The following is from gosmallbiz.com
Question:
If I sell my house at age 55 can I keep the profit without paying capital gains on it? How many times can I do this?
Answer:
Under previous law, being 55 made a difference. Today the exclusion of gain is larger and easier to deal with - plus it applies to everyone. You can exclude up to $250,000 from the sale of your primary residence ($500,000 for couples who have shared the primary residence and file jointly). There is no limit to how many times you can do so - but there is a limit that allows only one exclusion every two years.
Hope this helps.
For more information on gosmallbiz.com give me a call at 866-411-4737 ext 701 or visit www.PPLChicago.com and click on business plans.
Marty Couch
http://www.PPLChicago.com
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Marty Couch
Investor
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Re:Re:Defer Capital Gains Tax
Monday, August 20 2007 04:43 PM
I also found this information on gosmallbiz.com and thought it would be of interest to the group:
Question:
I am selling my personal residence that I have lived in less than 2 yrs because of financial hardship. I understand that you do not pay capital gains tax if you can prove hardship. Is this true?
Answer:
Subject to certain conditions, individual taxpayers may permanently exclude up to $250K ($500K for joint filers) in gain realized on the sale of their principal residence and there are certain exceptions and provisions from the two-year occupancy rule. As indicated in the IRS information below, "You can claim an exclusion, but the maximum amount of gain you can exclude will be reduced, if ... You did not meet the ownership and use tests, but the primary reason you sold the home was: A change in place of employment, Health, or Unforeseen circumstances.....
Unforeseen circumstances are considered to be the primary reason you sold your home if any of the following events occurred while you owned and used the property as your main home.
1. An involuntary conversion of your home.
2. Natural or man-made disasters or acts of war or terrorism resulting in a casualty to your home, whether or not your loss is deductible.
3. In the case of qualified individuals (listed earlier under Change in Place of Employment):
Death,
Unemployment (if the individual is eligible for unemployment compensation),
A change in employment or self-employment status that results in your inability to pay reasonable basic living expenses (listed under Reasonable basic living expenses next),
Divorce or legal separation, or
Multiple births resulting from the same pregnancy.
4. An event the Commissioner of IRS determined to be an unforeseen circumstance to the extent provided in published guidance and rulings. For example, the Commissioner determined the September 11, 2001, terrorist attacks to be an unforeseen circumstance."
You can review the IRS rules on this topic in the information below, but a local tax advisor or CPA may be helpful in clarifying the regulations and calculating your gain exclusion. You can review IRS information on determining gains or losses from the sale of property and the basis of property at the following websites:
http://www.irs.gov/publications/p523/index.html
http://www.irs.gov/taxtopics/tc409.html
http://www.irs.gov/publications/p544/index.html
Marty Couch
http://www.PPLChicago.com
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