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I am a 70 year old widow and am purchasing a small older

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home to downsize to when...
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: 1 year ago.Category: Tax
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Answered in 1 hour by:
3/21/2016
Tax Professional: Anne, Master Tax Preparer replied 1 year ago
Anne
Anne, Master Tax Preparer
Category: Tax
Satisfied Customers: 2,439
Experience: Enrolled Agent with 25 Years Experience specializing Individual and Small Businesses
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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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Tax Professional: Anne, Master Tax Preparer replied 1 year ago

Hi Constance

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

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