Avoiding Capital Gains Tax on Residence Sale

Orange County, California
Buying & Selling Real Estate
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Avoiding Capital Gains Tax on Residence Sale

Jennifer H.
Member since 2023 · 3 posts · 1 vote

Hi all, three quick questions.

1) Just wondering if there anything, beyond the 250k exemption, my friend selling his residence can do to avoid the capital gains tax.

He's in California, single and has lived in the home more than 2 years. I think only in the last 6 months he went from shared title holder/owner to sole owner and only one on title.

2) I've heard one can do a contingent purchase on the new home to avoid capital gains, but I'm finding little on this.  Is that true and is this the 1301 sale?

3) Is a CPA specializing in Real Estate the correct person to ultimately consult on this?  I'm basically just researching and helping get ducks in a row before he speaks to someone.

thanks for your time and knowledge.

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Wayne Brooks
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
2y

@Jennifer H.
1) no

2) buying another residence, or any other property, has No effect. You can’t do a 1031 with a primary residence. This assumes this was his primary the whole time.

3) yes

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  • Sean O'KeefePro Member
    CPA | Accepting new clients | 50 States · Member since 2022 · 1k+ posts · 870 votes
    2y
    Quote from @Jennifer H.:

    Hi all, three quick questions.

    1) Just wondering if there anything, beyond the 250k exemption, my friend selling his residence can do to avoid the capital gains tax.

    He's in California, single and has lived in the home more than 2 years. I think only in the last 6 months he went from shared title holder/owner to sole owner and only one on title.

    2) I've heard one can do a contingent purchase on the new home to avoid capital gains, but I'm finding little on this.  Is that true and is this the 1301 sale?

    3) Is a CPA specializing in Real Estate the correct person to ultimately consult on this?  I'm basically just researching and helping get ducks in a row before he speaks to someone.

    thanks for your time and knowledge.

     @Jennifer H.

    1. There are a couple of other options, including 1031 exchange, if the property was a rental
    2. 1031, not 1301 -> Identify the property within 45 days, close within 180 days to name a few of the requirements for 1031 exchange.
    3. Yes, Real Estate CPA

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    .

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    *This post does not create a CPA-client relationship. The information contained in this post is not to be relied upon. Readers are advised to seek professional advice.

    [email protected]628-241-0888
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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    2y

    @Jennifer H.
    1) no

    2) buying another residence, or any other property, has No effect. You can’t do a 1031 with a primary residence. This assumes this was his primary the whole time.

    3) yes

    2Reply
  • Nate MeekerBusiness Member
    Real Estate CPA | California · Member since 2020 · 543 posts · 251 votes
    2y

    @Jennifer H. A CPA who specializes in real estate would best be able to answer your questions and provide you a more specific and accurate answer based on you and your friend's residence. I highly recommend you shop around and see who is the best fit. It's not rocket science, but you should find someone who specializes in real estate. I've seen so many mistakes from generalist CPAs.

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  • Jennifer H.
    OP
    Member since 2023 · 3 posts · 1 vote
    2y

    Thanks all for the replies, very helpful.

    Will the fact that he went from co owner/title holder, to sole owner/title holder in the last six months affect his 250k exemption eligibility?

    I'm wondering if he had to be sole owner/title holder for the last two years to qualify.

    Any particular suggestions on finding a good Real Estate CPA?  I don't like the Yelp route I find it pretty unreliable.  I'm browsing the classified section here now and may post there, and sort of randomly looking at profiles of posters here.


    Again thanks all and hope everyone has a great new year.

    0Reply
  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    2y

    You also want to factor in any major improvements made to the property to increase your basis.

    Some items would be costs paid for a roof, HVAC, piping, etc

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