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Author: JABoa Big gold star, 5000 posts Feste Award Nominee! Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121187  
Subject: Re: Home Sale & Taxes Date: 9/19/1999 10:53 PM
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GeminiGVR, the answer appears to be yes and no. You want to look at IRS Publication 523 (www.irs.ustreas.gov), and in particular the section called "Ownership and Use Tests". There is an example given in which an owner of a 4 unit apartment building lives in one unit and rents out the others. The exclusion is allowed on the unit the owner lives in (so 1/4 of the sale price), but capital gains taxes are due on the gain from the sale of the other units.

Your Mom's situation is different, somewhat, and I am sure that the fact there are existing leases is a complication. It might affect the sales price, but it might not: NY Times had an article about $895,000 fixer-upper apartments recently.

It sounds as though it is worth spending a couple of hundred dollars to discuss the situation with a real estate attorney. This sort of issue must come up all the time in NYC. If Mom doesn't know one, you could probably go to your own lawyer in Miami and ask him or her to make some phone calls. My experience has been that lawyers usually have contacts, and will make calls as a professional courtesy. (Maybe not for free, but it's not picking someone out of the Yellow Pages.)

Regarding the rent vs. buy question in Florida, my personal suggestion would be to start out renting. My parents are approximately the same age as your mother is, and used to spend 6 months in Florida. The landlord wondered if they would like to buy. They said no, it was better to pay rent for 6 months than a mortgage for 12. Again, your situation is different, but the arguments in favor of renting to start out are: 1) you never know how you'll like it, and 2) your circumstances, like health, may change.
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