Tax

Have a Tax Question? Ask a Tax Expert

Ask an Expert,
Get an Answer ASAP!

Tax
This answer was rated:

I found some info sec. 105 which says that a rental exchanged

by 1031, must be held...
I found some info sec. 105 which says that a rental exchanged by 1031, must be held for 5 years, before it can be sold as a residence, in order to exclude the defered gain. And must meet the 2 year ownership & use test.
Is there any other investment, besides exchanging into a real property at
$ 500,000 that could be used as an exchange? client found investment company
that offers some kind of investment that would qualify? Do you know of any?
Thanks again,
Fred
Show More
Show Less
Ask Your Own Tax Question
Answered in 23 minutes by:
7/6/2013
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 12,855
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
Verified

NPVAdvisor :

Sale of residence that was formerly investment
property – the taxpayer is entitled to only a pro-
rated portion of the $250,000/$500,000 exclusion.
• Non-qualified use prior to January 1, 2009 is disre-
garded, except for purposes of meeting the 5 year
rule under HR 4520, if applicable1
• Gain resulting from depreciation is taxed and is
disregarded for purposes of determining the pro-
rated amount of the exclusion

NPVAdvisor :

This is a result of the amendment to rule 121, effective Jan. 1 2009

NPVAdvisor :

Maybe an example will help:

NPVAdvisor :

Taxpayer acquires an investment prop-
erty, rents it for 3 years and then occupies it for 5
years as his principal residence (no use prior to 2009)
before selling it and realizing $350,000 of gain of
which $40,000 is from depreciation deductions.
$40,000 of gain is depreciation and is excluded from
the calculation. The remaining $310,000 is subject to
the prorata calculation as follows:

NPVAdvisor :

3 (years of non-qualified use) = 3 (37.5%) x $310,000=$116,250
8 (years total ownership)
8
Thus $116,250 is not eligible for exclusion and is
taxed at the applicable capital gains rate. $40,000 of
gain is from depreciation and is taxed at the applica-
ble recapture rate. The remaining gain of $193,750
may be excluded from taxation under §121.

NPVAdvisor :

Here's another one:

NPVAdvisor :

Taxpayer acquires an investment prop-
erty in 2007, rents it until 2010, and then occupies it
for three years as his principal residence before sell-
ing it in 2013, realizing $400,000 of gain. The two
years prior to January 1, 2009 are disregarded (but
included for determining the five year period).
1 year non-qualified use
(disregard 2007, 2008) =
6 years of total ownership
1 (16.66%) x $400,000=$66,640
6
Thus, $66,640 is not eligible for exclusion and is
taxed at the applicable capital gains rate. $250,000 of
the remaining gain may be excluded under §121, with
the balance of the gain, $83,360 taxed at the applica-
ble capital gains rate. In sum, $250,000 is not taxed
and $150,000 is taxed.
Taxpayers selling a principal residence after
January 1, 2009, which was formerly used as an
investment/rental property should consult with their
tax or legal advisors regarding the application of the
amendment to §121 to their particular situation.

Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 12,855
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
Verified
Lane and 87 other Tax Specialists are ready to help you
Ask your own question now


Thanks Fred,

Let me know if I can help further

Lane

Ask Your Own Tax Question
Ask Lane Your Own Question
Lane
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 12,855
12,855 Satisfied Customers
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986

Lane is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,300 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,310 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

Robin D.

Robin D.

Senior Tax Advisor 4

13,695 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,651 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

R. Klein, EA

R. Klein, EA

Enrolled Agent

1,839 satisfied customers

Over 20 Years experience

< Previous | Next >

Related Tax Questions
I bought a rental property for 49000 and sold it for 29000
I bought a rental property for 49000 and sold it for 29000 many years later. During those years I depreciated it entirely. So do I it don't I have to pay capital gain on the entire 29000? … read more
abci168
abci168
Principal
27 satisfied customers
My question is about depreciation for rental property. My
Hello. My question is about depreciation for rental property. My rental property had no income during one year. In this case, since there was no income, I do not need to claim depreciation for that sa… read more
Fred Rook
Fred Rook
Corporate Controller
BSBA
31 satisfied customers
My wife inherited a piece of rental property from a
My wife inherited a piece of rental property from a revocable trust that her parents had set up after her father and brother died her mom did an amendment that made her trustee and sole heir. Her mom … read more
Lane
Lane
JD, CFP, MBA, CRPS
12,855 satisfied customers
I have a rental property that required major repairs this
I have a rental property that required major repairs this year. The repairs minus deductible were covered by my insurance. Is the entire amount of repair an allowable expense or only the insurance ded… read more
Lane
Lane
JD, CFP, MBA, CRPS
12,855 satisfied customers
Are you familiar with Capital Gain taxes on rental property?
Are you familiar with Capital Gain taxes on rental property? … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
I recently received a car as a payment for rental property
Hi, I recently received a car as a payment for rental property and I was wondering how the tax treatment would be … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,695 satisfied customers
I sold a rental property at a loss (no capital gains);
I sold a rental property at a loss (no capital gains); however should I pay the $133,000 on the principal of my house I owe 166,000 at 2.8% or buy another rental? … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
If my Schedule E loss is disallowed for a rental property
If my Schedule E loss is disallowed for a rental property (due to income level), can I take the mortgage interest and real estate taxes paid on Schedule A instead of on Schedule E?The entire expense a… read more
Chad CFP ®
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
723 satisfied customers
Estate capital gains tax rate for 61, single, unable to
estate capital gains tax rate for 61, single, unable to work, is claimed as a dependent form sister,only income collects $500 month stipend from gov., which pays for health insurance and meds. is gett… read more
emc011075
emc011075
Senior Tax Specialist
Bachelor's Degree
16 satisfied customers
Disposition of Rental Property. Rental property: Gross sale
Disposition of Rental Property.Rental property : Gross sale price: $600K Cost or Other Basis plus Selling Expenses: $300K Depreciation allowed or allowable: $100K (Form 4797 line 22)Adjustment: $300K … read more
emc011075
emc011075
Senior Tax Specialist
Bachelor's Degree
16 satisfied customers
I own a condominium which is currently a rental property and
I own a condominium which is currently a rental property and has never been my primary residence. Would like … read more
Chad CFP ®
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
723 satisfied customers
I bought a new rental property. Can I get any tax deductions
I bought a new rental property. Can I get any tax deductions for the money I spend to buy the property? … read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,458 satisfied customers
This question has to do with disposal of rental property.
Hi this question has to do with disposal of rental property … read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,458 satisfied customers
Capital Gains Question: My parents have a rental property
Capital Gains Question: My parents have a rental property they bought for $150,000 several years ago. The property is now worth around $500,000 dollars with a $350,000 mortgage. They want to gift me t… read more
Lane
Lane
JD, CFP, MBA, CRPS
12,855 satisfied customers
I am working on my taxes. I sold a rental property and
I am working on my taxes. I sold a rental property and according to my tax software (TurboTax), I had ~$100k gain. How does this get considered? Is it weighed in with all my gains and losses across my… read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,217 satisfied customers
I didn't claim depreciation on a rental property for 8
I didn't claim depreciation on a rental property for 8 years. I'm about to sell the property. How many years of the past annual depreciation can I claim? … read more
Lane
Lane
JD, CFP, MBA, CRPS
12,855 satisfied customers
I have question regarding capital gain taxation, I have real
Hello I have question regarding capital gain taxation … read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,217 satisfied customers
I sold a rental property and fully depreciated furniture and
I sold a rental property and fully depreciated furniture and fixtures such as refrigerator/oven/doors etc. Would I have to recapture the FF&E depreciated amounts as ordinary income with the sale when … read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,217 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x