Good Info for Real Estate Investors…. Avoid capital gains tax on sale of exchanged property

Playing by the 5-year rule

By Tom Kelly, Wednesday, January 11, 2012.

Inman News®

The lackluster housing market has many investors looking for bargain properties, sometimes in bunches. Buyers are getting more creative about funding their purchases, rethinking the role of real estate not only for their portfolios but also for their residences.

In a recent example, an older couple sold their home and purchased two Arizona golf-course condominiums with the proceeds — one for their primary residence and another as a rental — and still put some money in their pocket. What made the deal interesting was that they had purchased the original home six years ago via a tax-deferred exchange.

While investors had turned rental properties into principal residences for years, the timing for claiming the $500,000 principal residence exemption ($250,000 for a single person) on a home acquired via an exchange wasn’t clarified until late 2004.

Before then, taxpayers were left to guess how long they had to hold an investment property before deeming it a primary residence — or when it was safe to sell it and pocket any gain.

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About Bruce Bachtel

The Bachtel team serves buyers and sellers in the Upstate area of South Carolina. (Including: Greenville, Spartanburg and Anderson counties and the following cities: Greenville, Simpsonville, Mauldin, Greer, Travelers Rest, Easley, Powdersville, Duncan, Moore and others). Our team is ready and willing to help you with the sale or purchase of your home.
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