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PDtax, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 4670
Experience:  35 years tax experience, including four years at a Big 4 firm.
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I have a single family residence investment property

Customer Question

I have a single family residence investment property currently in escrow. It's scheduled to close around 8/4 and is located in Pasadena, Ca. Purchased in 8/2002 for $305k and sold for $567,500 as a 1031 exchange with the net proceeds of $240k potentially subject to capital gains. However, my accountant has said my wife and I qualify for a 'partial' (75%) exclusion since we'd lived there for 18 (not 24) of the past 60 months and only rented it to enable us to provide 24/7 care in San Diego for her alzheimer's-stricken mother. a) Is this allowable? b) Is there any way to defer the capital gains tax on the remaining 25%? c) If we were to go ahead with the 1031 and then allow the 45/180 day deadlines to expire, could we then utilize the IRS 75% exclusion and would that then subject us to the 3.5% Ca. withholding requirement via the exchange accommodator?
Submitted: 2 years ago.
Category: Tax
Expert:  PDtax replied 2 years ago.

Hi from just answer. I'm PDtax, and will assist.

Expert:  PDtax replied 2 years ago.

A. Yes, partial exclusion of 75% is possible, as your tax pro advised.

B. There is no way to defer the remaining 25%.

Expert:  PDtax replied 2 years ago.

C. You can use a 1031 to defer the remainder of the gain.

Thanks for asking at just answer. Positive feedback is appreciated. I'm PDtax.