Hello BP friends,
I want to sell a rental property purchased last year and pay long term capital gains tax. I understand it requires more than 365 days to pass from the day I bought it till the day I sell it.
1. Does the sale date refer to the date of the signed sales agreement or the closing date?
2. If I list it for sale 11 months since purchase but I make sure to sign the sale contract after 12 months, can I still qualify for long term capital gains tax? Or does the listing date have to be over a year as well?
Thanks in advance for your help!
1. There could be some debate, but generally the closing date. Form 1099-S sent to the IRS will report the date of closing.
2. Listing date does not matter.
My sales have gone the way as @Michael Plaks explained. The Date the property was in service “ready to rent” came up in a discussion as the start date but that may have been for a 1031 not long term capital gains. I can’t remember but that’s why you pay a cpa to do your taxes and keep you within the lines. Make sure your cpa is on the same page as the BP community because they are more familiar with your personal situation.
You're correct: for the capital gains, the clock starts on the date of purchase.
Date in service is for deductions and depreciation purposes.
A signed sales agreement is a date to sell the property at a future date which is the closing date.
The closing date is the date used to calculate holding period.
Make sure to have the closing date to be over 365 days from the day that you purchased the property.
And keep in mind you'll have tax on unrecaptured depreciation, in addition to capital gains.