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I plan to sell my primary residence in 2014. It's clear for 2 of 5 years that it was primary - purchased in 1996. It's more than two years after my husband's death. There is more than $250k gain.

I have a secondary property I use - we bought it in Oct 2010. It was a rental property until July 2012. Can the two of five years begin on July 1, 2012 or do I have to have sold the other property first ?

I would like to sell both and buy something else but I am wondering if it behoove me to cool my jets and sell the first one and then wait until the second qualifies as primary(if it ever does).

Thanks
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Are you eligible for a stepped up basis on both properties? It depends on your state and how the property was titled when your husband passed.

You can only claim the exemption once every two years. The exemption on the second property will be prorated for the time it was a rental.
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I plan to sell my primary residence in 2014. It's clear for 2 of 5 years that it was primary - purchased in 1996. It's more than two years after my husband's death. There is more than $250k gain.

Remember that it's likely your basis changed when your husband died. Have you taken that into account when calculating the expected gain? See Pub 551 for basis information.

I have a secondary property I use - we bought it in Oct 2010. It was a rental property until July 2012. Can the two of five years begin on July 1, 2012 or do I have to have sold the other property first ?

No on both counts. Your 2 of 5 years on the purchase side started October 2010. Your 2 of 5 years of the use side will start when you make it your primary residence.

I would like to sell both and buy something else but I am wondering if it behoove me to cool my jets and sell the first one and then wait until the second qualifies as primary(if it ever does).

You'd have to work the numbers and see. Don't forget that you can only exclude gain once every 2 years.

Details are in Pub 523.

Phil
Rule Your Retirement Home Fool
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Remember that it's likely your basis changed when your husband died.
It did and I have a market valuation at that point - I had forgotten about that.

Have you taken that into account when calculating the expected gain?
I hadn't but will.

Your 2 of 5 years of the use side will start when you make it your primary residence.

It's in the same state and for 2013, it's about 50/50 on time spent in each place - I'd have to actually add it up. If I have 2 of 5 in location one, is there a downside to making location two primary now ? Is it just using it as primary address, etc ? For my state, it only changes car licensing requirements.

Don't forget that you can only exclude gain once every 2 years.

I did - thanks.

Location two doesn't have much gain but I will start running numbers before I do anything.

All help is appreciated. IRL, it is tough to find knowledgeable people and I wanted to have some feedback.
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Location two doesn't have much gain but I will start running numbers before I do anything.

Remember to consider costs of sale and depreciation. If the sale of the second property won't result in a net gain, it doesn't matter whether it is a primary residence or when you sell it. If you only claim the exemption on the first property, and the two year rule won't apply.

Since the second property was a rental, there will be depreciation with the potential for recaptured depreciation.
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