Sellers of rental home may face tax consequences
Q. We recently sold a modest home for $88,000 that we lived in when first married, for eight years and then rented it for 20 years. We are wondering if we should buy another rental or another home, since we are 59 and 60 years old, and wish to avoid paying a lot of capital gains tax … the house was fully depreciated.
A. You may have some unintended tax consequences depending on your desired course of action. First, in order to qualify for a tax deferred exchange, you needed to make arrangements with a third party intermediary prior to the sale of the property. Consequently, it is too late to defer the taxes on the gain by using a 1031 tax deferred exchange.
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