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We own a house we have been renting .6 years. It was my

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We own a house we...
We own a house we have been renting for 4.6 years. It was my primary residence and we rent a house ourselves now. We want to buy a new house. When we sell the house we rent out is there a way we can use all the profit to buy the new house without paying capital gains.
Submitted: 1 year ago.Category: Tax
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Answered in 3 minutes by:
4/13/2016
Tax Professional: Lev, Tax Advisor replied 1 year ago
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,130
Experience: Taxes, Immigration, Labor Relations
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Yes - that is possible if you purchase another rental property. You may choose to do so called section 1031 like-kind exchange..However if you want to purchase a personal residence - it would not qualify for section 1031.The replacement property must be also investment or business property like another rental property. .
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Customer reply replied 1 year ago
Even if the first was our primary residence and we have not purchased anything else while renting it out?
Customer reply replied 1 year ago
And we buy a new primary residence
Tax Professional: Lev, Tax Advisor replied 1 year ago
That make no difference.To qualify for the exclusion - the property must be owned and used as a primary residence at least two out of last five years before the sale.
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Tax Professional: Lev, Tax Advisor replied 1 year ago
As these conditions are not satisfied - you do not qualify for the exclusion.But how proceeds are used is not relevant.The ONLY way to defer (not avoid!) tax liability on the gain realized from the sale of rental property is section 1031 exchange.I will help you to estimate expected tax liability if needed.
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Lev
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,130
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