Capital Gain Tax Exemption - Posted by rick ward

Posted by David Krulac on October 04, 2003 at 20:50:55:

I’m not a cpa, but my hmo is that you are not the owner until you exercise the option. If you were contract for deed, I would argue the opposite.

David Krulac

Capital Gain Tax Exemption - Posted by rick ward

Posted by rick ward on October 04, 2003 at 16:29:07:

I have a question regarding the 2 year rule for a personal residence. I lease a home in Seattle with the option to purchase. We have agreed to make all the payments directly to the bank for the amount owed on the owners loan. We would like to take ownership of the property, continue fixing it up, and sell in the spring. Can we use the 2 years we have lived in the house to reduce our capital gain? Or is their another way to get around the capital gain?

Thank you,


Two separate rules - Posted by randyOH

Posted by randyOH on October 05, 2003 at 11:34:44:

To qualify for the exclusion, you have to own the property for two years and use it for two years as your principal residence. But these two periods do not have to be concurrent. So you could count the time you rented the house toward the two-year use requirement. But, after you buy it, you would have to wait two years to sell it. So you could rent it out for two years, then sell it and you would be able to exclude your gain.

You would probably make more money by renting it out on a lease/option anyway. You will get a higher price and not have to pay a commission when you sell. Of course, you would have to get it sold within three years to qualify for the tax exclusion.

Maybe you can get your money out of it buy financing it for 90% of appraised value. You can also get an option fee from your rent-to-own tenant of around 3 to 5% of the option price.

Something to think about.