Message Font: Serif | Sans-Serif
 
No. of Recommendations: 0
I have a long question with twists and turns. I'm trying to understand the $250k exclusion for selling your home. I won't use the exact numbers but here's the story:

1. I recently "exchanged" into a $250k 3-unit which has an adjusted basis of 100k.

2. I've been thinking about living there and want to know what kind of tax treatment would result when I eventually sell.

3. What if at some time in the near future (how soon can this be?) I move into the 3 unit and turn it into a single family home and then live there for at least 2 years before I sell. I might do this in degrees... first occupy one unit and then all of them but I know I'd have to live in the entire house for 2 years before selling.

4. The home I currently occupy will be sold and I will pay a small cap gain since I've only owned it for 1 yr at this time and I would like to move to the 3 unit soon.

5. Would the gain on the 3-unit turned primary residence be excluded up to $250k (I'm single) or do I have to pay cap gains on the depreciation claimed or anything else? If I don't rent it for long before moving in, there would be very little depreciation. But what about past depreciation on the previous property that was exchanged for the current one?

See what I mean about twists and turns?

The IRS doesn't seem to have complete answers or any examples that fit my potential situation. They recite something about using the basis (would this be the basis when it was purchased as rental property?) to calculate gain but also that I must pay the cap gains on any depreciation taken (from just this property and not one exchanged earlier?). Yet, the IRS example of owning a home and renting it for 3 years and living in it for 2 years before selling does not mention anything about depreciation.

Any information would be greatly appreciated!
Print the post  

Announcements

Disclaimer:
In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement