Re: Cap gain tax. - Posted by Dave T
Posted by Dave T on April 01, 1999 at 14:23:04:
The answer to your question depends on what you did with the property for the two years you owned it.
If the property was your principle residence, then when you sell it, the first $250K ($500 if married filing jointly) of your capital gains are exempt from taxation. Generally, you can only do this once every 24 months. The one-time exemption for over-55 tax payers has been repealed.
a. If you took two years to rehab the property, then sold it, your profits are taxed as ordinary income. There is no tax deferral strategy available to you in this situation. Even if you rehabbed the property quicker, but did nothing else with it except put it on the market for sale, your profits are taxed as ordinary income.
b. If instead, you converted your rehabbed property to a rental income property, then you can do a 1031 exchange to defer your capital gains tax. Generally, capital gains tax can not be avoided when you sell your property, just deferred.
I am not a tax professional, and I am only giving my opinion and interpretation of the rules. Please see a qualified tax professional for advice specific to your situation.