Capital Gains and Losses

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I am in the process of selling an investment property and…

Customer Question
I am in the...

I am in the process of selling an investment property and buying a primary residence. Am i able to transfer the proceeds from the investment property into the primary residence without paying taxes on the earnings ?

Accountant's Assistant: I love the idea of making big money with investments, but there are so many things that could go wrong. The Accountant will be able to help you. Please tell me more, so we can help you best.

I said it like it is. What other info would you need

Accountant's Assistant: Is there anything else important you think the Accountant should know?

The investment property was in an llc with another partner

Submitted: 24 days ago.Category: Capital Gains and Losses
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3/27/2018
Tax Expert: Dr. Fiona Chen, Certified Public Accountant (CPA) replied 24 days ago
Dr. Fiona Chen
Dr. Fiona Chen, Certified Public Accountant (CPA)
Category: Capital Gains and Losses
Satisfied Customers: 923
Experience: Former IRS Revenue Agent
Verified

I'm Fiona, former IRS revenue agent. I am looking at your question and will get back to you soon. Fiona Chen, MPA, Ph.D., CPA, ABV, CFF, CITP,IMTA

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Tax Expert: Dr. Fiona Chen, Certified Public Accountant (CPA) replied 24 days ago

Dear Customer,

"Am i able to transfer the proceeds from the investment property into the primary residence without paying taxes on the earnings ?"

No.

Please feel free to follow up.

Regards,

Fiona

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Customer reply replied 24 days ago
how does the 1031 exchange work ?
Customer reply replied 24 days ago
Cant i take the proceeds from the investment property sale and use them to buy a new property and defer the taxes
(the only difference being i intend to stay in the new one) ?
Tax Expert: Dr. Fiona Chen, Certified Public Accountant (CPA) replied 24 days ago

Dear Customer,

An investment property and a personal primary residence are not like kind property to start with. Therefore, like kind exchange does not apply in your situation.

I saw your second posting. No, still an investment property is different from home residence.

Enclosed are some of the website describing how the Section 1031, like kind exchange works. If you have a separate question on the subject, please feel free to post another question. Thank you.

https://www.irs.gov/newsroom/like-kind-exchanges-under-irc-code-section-1031

https://www.law.cornell.edu/uscode/text/26/1031

https://en.wikipedia.org/wiki/Internal_Revenue_Code_section_1031

Regards,

Fiona

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Customer reply replied 24 days ago
what happens if i sell my investment property to buy another investment property (do a fair 1031 exchange), make significant repairs and renovations and it doesn't rent or sell and i start living in there ?
Tax Expert: Dr. Fiona Chen, Certified Public Accountant (CPA) replied 24 days ago

Dear Customer,

The enclosed website discusses some of the questions you are interested. However, it is advised that the "intend" is the major point the IRS will review on. This website is not official website answers. It is advised that you don't do such a scheme and shame transaction. You may end up not only owe capital gain but also civil or criminal fraud penalty on top of it.

http://www.1031exchange.com/faq/

Regards,

Fiona

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Customer reply replied 24 days ago
Got it thanks. No i dont intend to do a scheme and shame deal but want to understand all possibilities and understand how this works.
Tax Expert: Dr. Fiona Chen, Certified Public Accountant (CPA) replied 24 days ago

Dear Customer,

There is really no possibility to get around paying for the capital gain unless you really want to do a bona fide like-kind exchange.

Regards,

Fiona

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Dr. Fiona Chen
Dr. Fiona Chen, Certified Public Accountant (CPA)
Category: Capital Gains and Losses
Satisfied Customers: 923
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