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Robin D.
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Category: Tax
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Experience:  15years with H & R Block. Divisional leader, Instructor
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I own, for example, a 1000 shares in a coop in NYS, a coop

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I own, for example, a 1000 shares in a coop in NYS, a coop which I bough for $100,000 30 years ago which is now worth $1,000,000..Assuming my Board will allow it (which they will) I take my 1000 share certificate and split it into two: 300 shares and 700 shares.

I sell my apartment for $1,000,000 (1000 per share) as follows: My buyer buys the smaller apartment for $700,000 and a 700-sharer certificate. That buyer than pays me $300,000 for a 300-share certificate for which we exchange proprietary leases so, in effect, he gets my apartment, I get the smaller one.

Is my profit $400,000 ($1,000,000 selling price less $100,000 cost less $500,000 exclusion) or nothing: shares are worth $1000 each and I am in effect selling 300 shares:for $300,000 less $500,000 exclusion.
Submitted: 2 years ago.
Category: Tax
Expert:  kbrodycpa replied 2 years ago.

kbrodycpa :

A gain on your shares would be the excess of amount realized over your basis. If you paid $100K for shares and sell them for $1,000,000, you have a $900K capital gain on your stock sale. If you are selling your primary residence, you can exclude up to $250,000 k of gain, or $500,000K if married filing jointly. That would apply whether you sold your home for cash, or sold your home for stock. However, it sounds like you are selling stock, not selling real estate. If you could help clarify the proposed transactions for me, I can tell you the tax consequences. If another expert can help in the mean time, feel free to disregard my response and communicate with the other expert.

kbrodycpa :

I am researching now to verify the current tax treatment of the sale of shares in cooperative housing corporations that entitle you to lease the apartment you use as your primary residence.

kbrodycpa :

it appears that per IRC 121(d)(4), you may exclude part of the gain in the amounts mentioned above as if it was a sale of a personal residence, provided the time and use requirements were met. If the apartment was your home for 30 years, then those tests were met. I am not sure the purpose of selling and leasing back the smaller apartment, vs. just selling the larger one and keeping the other 300 shares and continuing to lease. I suppose you would have to clear that with the Board. Let me know if that helps or if you have further questions. Thanks. Kim.

Customer:

My basic question is: if I move to a smaller apartment in the same building/coop, I am in effect selling a large apt and buying a smaller one. I want to knio if I pay capital gains tax on the gain from the entire sale or only the difference between the to apartments since there is only a reduction of 300 shares.

Customer:

If I sell the apartment (my primary residence) and move somewhere else, I would have to pay the full capital gain. My question is: if I move to a smaller apartment in the same building/coop which has 300 fewer shares, can I escape the capital gains tax on the entire sale. In case you do not know, when you buy shares in a coop, you are assigned a proprietary lease for the apartment you are buying. Therefore, I would have to exchange the lease for my larger apartment for the smaller one. So does the exchange of a lease for a 100 share apartment qualify as a sale of the 100 shares even if there is an exchange for a proprietary lease in the same coop for 700 shares?

Expert:  Robin D. replied 2 years ago.

Hello and thank you for using Just Answer,

Unfortunately, no. The sale of the apartment and the purchase of another (in the same building or in a different state) are 2 independent transactions. You can not defer the capital gain on the sale of the first apt because it is personal use and will be replaced with personal use property.

The exchange would be a sale. You would need to show the entire sale of the apartment and will show the sale amount as any money and value of any other considerations you receive for the apartment.

Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 7463
Experience: 15years with H & R Block. Divisional leader, Instructor
Robin D. and 2 other Tax Specialists are ready to help you

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