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Anne
Anne, Master Tax Preparer
Category: Tax
Satisfied Customers: 2355
Experience:  Enrolled Agent with 25 Years Experience specializing Individual and Small Businesses
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I am a 70 year old widow and am purchasing a small older

Customer Question

I am a 70 year old widow and am purchasing a small older home to downsize to when I sell my farm in about 5 years. I am trying to figure best way to minimize taxes. I will profit around $500,00 on farm and it will be too long a period to claim the reinvestment option. I also have a commercial building in an S corp. I'm thinking of buying the house in my name and then selling it to corp in in two years when I sell commercial building. Will have a $500,00 profit there as well.At the time the corp buys it, it will be a rental. Will that be an legal transaction for reinvesting the money from s corp?
Submitted: 8 months ago.
Category: Tax
Expert:  Anne replied 8 months ago.

Hi

I'm Anne. I've been preparing taxes for 27 years and I'll be happy to help you.

First, when you sell your personal residence, you may exclude up to $250,000 of PROFIT, so you would only be paying capital gains tax on the $250,000 you couldn't exclude, and capital gains tax this years caps out at 20%, meaning you would pay approximately $50,000 ($250,000 x 20%) Please see rules for excluding the gain on a personal residence below:

https://www.law.cornell.edu/uscode/text/26/121

If you buy a new house in your name, and then you transfer it to your S Corp, the S Corp will not qualify to use the $250,000 exclusion (and you can take that exclusion on the house you're planning to buy as long as you live there as your principle residence, and you haven't taken the $250,000 exclusion in the prior 2 years.

The S Corp is not eligible for the $250,000 exclusion.

If you plan on changing this property from your personal residence to rental property, then you can move that property to the S Corp with no problem.

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Expert:  Anne replied 8 months ago.

Hi Constance

This was in my que, but there was no follow up question from you typed in. Did you have any questions?