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Capital Gains Tax on a Secondary Home
Hello BP and thanks in advance for your help!
From my understanding, secondary homes are not exempt from the capital gains tax, and if you are not renting it out then you cannot do a 1031. However, this client has had a relative living in it for the past 3 years (they have owned the property for 3 years), and the relative has been paying around $900 a month to live there. But my client has not been reporting the income as a rental property. Is there a legal way to turn this into a rental property so that they can save some money on the sale of the property?
I was thinking if they backdated a lease agreement with their family member and then planned to properly report the property on their taxes in early 2021 this might be enough? Let me know if you guys have any ideas!
Thank you.