Newbie question on Capital gains - Posted by Pat


#1

Posted by John(NH) on November 19, 1998 at 13:05:36:

We’re assuming he is talking about investment property.

-John


#2

Newbie question on Capital gains - Posted by Pat

Posted by Pat on November 18, 1998 at 06:43:53:

Suppose I sell a property for 75k (no underlying mortgage) and use the entire 75k for purchase or development of more property. Would I pay capital gains on the sale of the
75k property even though the entire amount was used to
invest in more property? This is hypothetical, I’m just trying to figure capital gains into my game plan. Sorry for the novice question. Thanks a bunch in advance.:slight_smile:


#3

Wait a minute … - Posted by Redline

Posted by Redline on November 19, 1998 at 12:49:39:

What happened to “Own house for 5 years, and live in it for two out of the five years and pay NO capital gains on it when you sell up to $250,000 for individual and $500,000 married filing jointly” ??


#4

Re: Newbie question on Capital gains - Posted by Bud Branstetter

Posted by Bud Branstetter on November 18, 1998 at 11:15:20:

Pat,

Your taxable gain is based on your profit not sales price. Your profit is your sales price less minus sales cost, minus fixup expense, minus acquisition costs(in effect basis). To avoid capital gains consider doing the 1031 exchanges on long term investment property or doing it in a Roth IRA. If you are flipping, consider a corporation in which you deduct mileage, office expenses, pension plan contributions etc.


#5

Re: Newbie question on Capital gains - Posted by Bill

Posted by Bill on November 18, 1998 at 07:18:16:

Unless you exchange the property for ‘like’, ( IE: rental property for rental property) property that is atleast the same or greater value, you will be faced with capitol gain. Try an IRS 1031 “Starker” Delayed exchange. Works well.


#6

Re: Wait a minute … - Posted by Dave T

Posted by Dave T on November 20, 1998 at 17:59:17:

The ownership and occupancy requirement is a minimum 24 months. After 24 months as an owner-occupant, I am free to sell the property and claim the allowable capital gains exemption for my profits.

The 2 of the last 5 year rule applies to the timing of the sale. Essentially this says that after I have satisfied the 24-month owner-occupant requiremnt, I can convert my principle residence into an investment rental, then sell it within the next three years and still qualify for the capital gains exemption. This prevents me from maintaining my former principle residence as an investment property for 20 years, then claiming the capital gains exemption upon sale of the property.

The framers of the law did recognize that market conditions may not always be right to sell at a profit when a homeowner must sell. Therefore they provided a three year grace period to sell the property and still qualify for the capital gains exemption.