Message Font: Serif | Sans-Serif
No. of Recommendations: 2
We bought a home about 9 months ago -- now, we are plaqnning to sell it (at a profit), and buy a bigger home.

So what does this mean for our taxes?

Plan to pay tax on your profit.

Are the pre-97 rules on deferring gains on houses still available as an elective, or do those strictly apply only to property disposed of before May 7, 97?

There is no deferral allowed on the sale of a residence. The pre-1997 rules are history. Instead you can exclude up to $500,000 of profit on the sale of your primary residence if you own and occupy it for 2 out of 5 years, which you will not. There is also a partial exclusion if you meet certain conditions, ie., you sold your house because of a change in health, a change of employment or other special circumstances allowed by the IRS (none have been announced yet).

What is the smart thing to do? Any approaches to run up the cost basis, run down the sale price that can be used, or otherwise roll gains into the new property?

You can run up the cost basis by making improvements, but they will also increase your sales price. There is no way to roll gains into a new property.

One thing may be to get the buyer to agree to close in 3 months -- but there is also some interest in just getting it over with, having the deal closed and put the money in the new house...

Delaying would be very useful, as it will convert your gain from short-term to long-term. This should save you significantly on taxes.

You probably should review a copy of IRS Pub. 523, Selling Your House, before you commit to anything.

Print the post  


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.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
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.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
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.