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Ask R. Greg Paszkiewicz Your Own Question
R. Greg Paszkiewicz
R. Greg Paszkiewicz, Enrolled Agent
Category: Tax
Satisfied Customers: 357
Experience:  9 years preparing tax returns - Marietta, GA
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Capital Gains and State Tax (NC) Questions

Customer Question

I am a North Carolina resident. I sold my primary residence in Florida in 2004 but have been using it as a rental since 1998. I worked at a Christian Camp from 1998 to 2004 and they provided my housing so I did not rent or purchase another primary residence from 1998 to 2004. Last year (2004) I purchased a primary residence in North Carolina with the proceeds from the Florida sale. Here are my questions. (1) IS THERE ANY WAY I CAN KEEP FROM PAYING CAPITAL GAINS EVEN THOUGH I DID NOT QUALIFY FOR THE
SECTION 121 EXCLUSION? (2) SINCE I SOLD THE HOUSE IN FLORIDA DO I HAVE TO PAY NORTH CAROLINA TAX ON THE GAINS FROM THE HOUSE SALE?
Submitted: 11 years ago.
Category: Tax
Expert:  R. Greg Paszkiewicz replied 11 years ago.
Unfortunately there is no way to avoid the capital gains tax you do not qualify for any exclusion and there is no longer a reinvestment option to defer gains. The gain will also be taxable in NC because FL has no state income tax. As a NC resident you are required to report all of your income from all sources but you can claim a credit for any tax paid to other states on non-NC income but since FL has no state tax there is no credit to claim. The only way to avoid the tax would have been to do a like kind exchange and buy a replacement rental property with the funds.

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