Hey everyone, got a question for you. We hve a debate going on. We bought our home for 330k 3 years ago and sold for over 500k. Do we pay capital gains tax? Thanks!
Hi @NIcholas Hamel . I think the rule is you don't pay capital gains if you've lived in it for 2 of the last 5 years and if your combined income is less than $500K. But definitely ask a CPA because I am not a tax expert.
Awesome thanks tim. Also my inlaws are selling a rental property they have. I told them i had done a 1031 to avoid paying the taxes. They said their accountant said they dont need to do that as long as they use the money for another rental. Does this sound off to you?
I am not too sure on that one. I'm sure their accountant knows better than I do. Not too familiar with 1031 exchanges outside a surface level understanding. Sorry man, best of luck!
No worries at all. I appreciate your help tho! 👍🏻
@NIcholas Hamel , Your parents accountant is partially right. As long as they purchase replacement investment real estate worth at least as much as their sale they will defer all tax. But that is exactly what a 1031 is. And the first unbreakable rule of a 1031 exchange is that you have to follow the entire process in order to defer all tax.
So unless they use a qualified intermediary, adhere to the reinvestment, titling and timing requirements they will not defer anything.
Thanks dave! So if they follow all the rules of a 1031 they dont have to use an intermediary exchange company?
Nope - One of the rules for doing a correct 1031 exchange is the requirement to use a qualified intermediary. So unless they use a QI they are not following the 1031 rules and their exchange will fail.
This is where their accountant was wrong. He was right that they only need follow the rules - But one of the rules is the required use of a QI.
Ok got it! I think i misread your response at first. I appreciate your help. Thank you so much
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