Hi BiggerPockets Crew,
I currently live in Chicago and my unit is about to be sold in a multi-unit buyout for about a $100k profit. I've lived in the property for about 6 months with the intent of staying here for 1 year. The closing of the properties would start in about 6 months and with 901 units in the building it may take a while to close on my unit.
With that said, I am planning on moving to Seattle in about 6 months where I would rent for a year, as I'm not sure how long I want to stay in Seattle. Assuming the $100k profit, how can I strategize to pay as little tax on this as possible? I'm familiar with the 1031 exchange, but I would not break even purchasing a property in Seattle and managing a property in Chicago from Seattle does not seem very feasible as property management companies would eat into my monthly cash flow.
Happy to hear suggestions!
@Eric N. , The 1031 wouldn't work for you anyway. It is for investment property only. Your only hope is to explore an exception to the primary residence exclusion if that move to Seattle is somehow required and is the cause of your sale.
As Dave has mentioned, 1031 would not work in this case.
Unless you qualify for the partial 121 exclusion, you should anticipate to include STCG which would be taxed at your marginal tax rate if the sale occurs within 12 months.
You should anticipate LTCG which is taxed at favorable rates if the sale occurs after 12 months of ownership.
Consider both federal and state taxes.