2 year rule for a personal residence - Posted by John

Posted by michaela-ATL on October 06, 2003 at 12:45:12:

Kyle,

I really don’t know where the best places for REI are. I don’t want to plan my life around that. I’m sick of the south and that the market is so dead doesn’t help. I will go to California or Florida, depending on my monitary situation at the time when I’m ready to go. No snow and close to the ocean :wink:

Michaela

2 year rule for a personal residence - Posted by John

Posted by John on October 04, 2003 at 22:59:45:

Could somebody explain the 2 year rule for a personal residence in detail please? Thanks in advance for all help!

Re: 2 year rule for a personal residence - Posted by CTH

Posted by CTH on October 05, 2003 at 06:36:05:

What if you own your home for one year transfer to another city.
Small profit on sale of home but purchased new home for more than you sold the first home.

Re: 2 year rule for a personal residence - Posted by BrokerScott (Mich)

Posted by BrokerScott (Mich) on October 05, 2003 at 05:47:38:

I assume that you mean the capital gains exclusion for income tax purposes. In a nut shell- If the place you’ve sold was your primary residence for 2 of the last 5 years, you may exclude the capital gains on the sale up to $250k for a single and $500k for a married couple. You can rent it for a day less that 3 years and sell, or if its a rental, you could theororeticly move back for 2 years and then sell it. This exclusion can be used over and over, using the same criteria. Hope this answers you question. Best, Scott

An exemption in the 2 year rule?? - Posted by Kyle WY

Posted by Kyle WY on October 05, 2003 at 23:13:59:

First of all, I am not an accountant, but an investor told there was an exemption in the two year rule. If you had to sell your home before you owned it for two years because of job transfer, that you could prorate the 250k or 500k if you?re married for the time you owned the house. Say you had a house for one year, you could take 125k or 250k tax free under the personal residence tax law.

His take on this is if you were just starting out and wanted to be a professional rehabber, you could buy a house, live in it while fixing it up and sell it for up to 125k one year later and not have to pay any taxes, because you are a professional rehabber and ?had? to move to your ?new? rehab house. And according to him, there is not a limit on how many times you could do this in any time frame.

Just a thought for making a good living and not having to pay any taxes, if you don?t mind a little gipsy living :wink:

Kyle WY

Re: An exemption in the 2 year rule?? Help - Posted by Chris

Posted by Chris on October 06, 2003 at 13:28:40:

There is a limit. You can only do get this exemption once every two years. It is a loop hole but hot as big as you think. Help me out with this Bill!!!

Rehabber moves Allot? - Posted by Randy

Posted by Randy on October 06, 2003 at 11:01:42:

I have a Rehabber that moves every couple months. He buys all his rehabs as owner occupied for several reasons ? better financing, can do most of the work as ?Home Owner? (fewer permits and easier inspections from building services) better tax treatment.

He never moves more than a few miles. Surprisingly he sells his new home sometimes before he even gets to move in. Usually as soon as he parks his truck out front, someone comes along and offers to buy it.

Re: An exemption in the 2 year rule?? - Posted by michaela-ATL

Posted by michaela-ATL on October 06, 2003 at 07:38:34:

I thought there was a minimum distance involved? I might be wrong, though

Michaela

Re: An exemption in the 2 year rule?? Help - Posted by Kyle WY

Posted by Kyle WY on October 06, 2003 at 14:33:01:

Chris,

This is a link to where I got this infomation. Its from Doc on the mobile home board. Read it and tell me what you think.

http://www.creonline.com/mobilehomes/wwwboard4/messages/18155.html

Kyle

Re: An exemption in the 2 year rule?? - Posted by Kyle WY

Posted by Kyle WY on October 06, 2003 at 11:26:41:

Michaela,

I think he said it has the same rules for moving as the moving expensed the IRS will let you deduct if you have to move for job related reasons. But still some thing to think about.

By the way, I have read a couple of time were you have mentioned that you are moving from Atlanta in the spring. Its this in effort to find an better place for REI, or are you just looking to get out of the city. I too an looking for some place new to live as a small town in windy WY isn’t the greatest place to try to make a living in REI (and it gets cold in the winter…burrrrr). I have been to Atlanta when I worked in racing and it was ok. I lived in Charlotte for about 3 years, but all of my family lives in the western part of the country, to it makes it hard to visit. I’d be interested in your take as to where a good place to move for REI world be.

Thanks, Kyle

There are some qualifications - Posted by michaela-ATL

Posted by michaela-ATL on October 07, 2003 at 06:58:39:

Kyle,

I just vrought the same issue up somewhere else and someone pointed to this IRS publisaction 623:

Employment. For this purpose, employment includes
the start of work with a new employer or continuation of
work with the same employer. It also includes the start or
continuation of self-employment.

Distance safe harbor. The primary reason for the sale
of your main home is a change in place of employment if:

  1. The change occurred during the period you owned
    and used the property as your main home, and
  2. The new place of employment is at least 50 miles
    farther from your home than the former place of
    employment was. (emphasis added)

Example. Justin was unemployed and living in a
townhouse in Florida that he had owned and used as his
main home since 2001. He got a job in North Carolina and
sold his townhouse in 2002. Because the distance between
Justin?s new place of employment and the home he
sold is at least 50 miles, the sale satisfies the conditions of
the distance safe harbor. Justin?s sale of his home is
because of a change in place of employment and he is
entitled to a reduced maximum exclusion of gain from the
sale.

I LOVE IT11111 - Posted by michaela-ATL

Posted by michaela-ATL on October 06, 2003 at 17:12:32:

What an awesome exception. I tend to move around with my rehabs anyway and since I don’t have any kids and my dog is only concerned about being wherever I am, this would work beautifully for me.
YEEHAW

michaela

Re: An exemption in the 2 year rule?? Help - Posted by Cjris

Posted by Cjris on October 06, 2003 at 16:43:45:

Okay,

I went to the IRS website and pulled the PUB 523. You are right this is a big loop hole.

The reg reads:

“You cannot exclude the gain on the sale of your home if during the 2-year period ending on the date of the sale You sold another home at a gain and excluded all or part of that gain. If you cannot exclude the gain you must include it as income”.

“However, you can still claim an exclusion if you sold the home due to a change in place of employment, health or unforeseen circumstances.
The maximum amount you can exclude is reduced.”

Okay. It’s clear now.

So I take back what I said before, there is no time limit on the exclusion based on these facts.