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PhillipB EA
PhillipB EA, Accountant
Category: Capital Gains and Losses
Satisfied Customers: 704
Experience:  Enrolled Agent with 8 years experience in tax return preparation, representation, and taxpayer consultation
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We have a Nevada condo bought for 100,000 (2012) now worth

Customer Question

We have a Nevada condo bought for 100,000 (2012) now worth about 180,000. It is in a trust and rented. We want to sell it and buy another condo for about 140,000. What capitol gains can we expect to pay? Could we do a 1031 exchange and pay capitol gains on only the 40,000 difference? Also, if the condo were taken out of the trust and put in my name (I don't work and am in the lowest tax bracket) would that save us money on taxes? Any other ideas. Thank you in advance.
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Submitted: 10 months ago.
Category: Capital Gains and Losses
Expert:  PhillipB EA replied 10 months ago.

Thanks for using JustAnswer.com. I will do my best to provide a clear and concise answer to your tax question based on the information that you have provided.

Do you live in the condo, rent it out, use it as a second vacation home, or do you rent it out short term and use it as a vacation home?

If you live in the condo or have lived in the condo for 2 of the last 5 years that you owned the condo, any capital gains would be tax free up to 250,000 (or 500,000 for a married couple). However, it doesn't sound like this was your primary residence.

If this is a property that is used a rental property, a section 1031 exchange would be ideal and would work out as desired.

If this is a vacation rental (one that you rent out short term and use personally for vacations) the section 1031 exchange can work. However, there are some personal usage rules and rental period rules that would need to be followed. The property you sell must have been rented for 14 days or more at full market for each of the two years prior to the sale, and the new property must also be rented for 14 days or more for the two years after the purchase of the new property. Further, you cannot use it for more than 14 days per year for all of the years involved. (the two years prior to the sale, and the two years after the purchase).

If this is a personal second home only, the gain will be fully taxable at the applicable capital gains rate.

If this is held in a living trust where you are the grantor, the income will reported on your individual tax return and be applied at your individual rate and there would be no need to take it out of the trust. Is this a revocable or a non-revocable trust?

Let me know if there are any concerns or questions. If this answers your question to your satisfaction, please rate my response as satisfactory so that I receive credit for helping you. I hope you have a great holiday weekend and thanks for your business.

Expert:  PhillipB EA replied 10 months ago.

Hi. Just checking to see if there are any questions. Please let me know if there is anything else that I can do for you. If not, please remember to rate my performance so that I receive credit for assisting you.