Posted by John on September 17, 2004 at 08:10:27:
An investment property can be exchanged for another
investment property with the tax on the gain deferred. The tax basis is
moved from the old to the new.
More or less the way this works is the second has to be worth more
then the first. Trading across or up. Hence the downsize idea will only
work if the second place costs the same or more (and is just smaller).
The roles are very specific. You can mix (some deferred and some
taxes due) so you can trade down and reduce the tax immediately due.
The property has to be a investment property and not a personal
residence. Not sure if a zero rent investment property will cleanly pass