|
New
5-year rule on Personal Exemption
and §1031
In a bill that was just recently
signed by President Bush on October
22, 2004 the time requirements
for owning the house in order
to get the exclusions under Section
121 are now extended to
five years.
So
by using Section 1031 (Like-Kind
Exchanges) and this new rule from
Section 121 (Personal Home Exemptions)
Fred and Sue can sell an investment
property, exchange into a new
residence (treating it as an investment
for one year and one day so as
to not endanger their exchange),
and then they can move
into the property and make it
their personal primary residence.
After
then owning the residence for
a full five years, and living
in it as their primary residence
for just two of those five years
-- they can sell the residence
and pay no capital gains
taxes! Even including the gains
from the 1031 exchange as well...!
(The exemptions are:
up to $500,000 if they file joint,
and up to $250,000 if they file
a single return.) Voila!
Fred and Sue have turned their
investment property into tax free
cash.
This
used to be able to be accomplished
in just three years -- but the
new twist to the sale of a primary
residence is not too bad of a
change -- the IRS could have just
done away with this entire scheme.
But instead, they modified it
so that the magic of vaporizing
your capital gains now just takes
two more years!
Make sure that you use a Qualified
Intermediary that knows how to
structure your exchange with this
different strategy!
--The
Experts
|
