Can you "flip" an income property that you don't live in and avoid capital gains? I'm talking about holding a property for the 2 year period that is supposed to make you exempt. :tongue:
Hey grinder, welcome aboard.
Well if you don't live in it, it's income property (we hope). Therefor you pay tax on the gain. Hold it for less than one year and it's short-term so the rate is the same as your ordinary income. Hold it for more than one year and it's long-term so the rate is 15%.
The two year RESIDENCE rule (2 of the previous 5 years) obviously applies to OWNER OCCUPIED property. So it doesn't apply in this case.
You can do a 1031 (Internal Revenue Code section 1031) exchange. You don't do a straight exchange of property for property. You sell yours, THE PROCEEDS ARE HELD BY A THIRD PARTY FACILITATOR, you find another property and they pay the money for the REPLACEMENT property. There are strict rules about wording of sales contracts, identification of replacement property, timing etc. So if you're considering it read up on it.
Lucky you, to actually have an increase in value in a short time. I live in TX where appreciation is pretty much unheard of, except in some rare cases.
Good luck and let us know if we can help further.
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