Is it true there is some clause in the capital gains law that says if you receive your profits in installments and the installments last for not less then 2 years and you receive no less then 2 payments, you do not pay capital gains on it because you received installments instead of cash upfront or lump sum???
What if I sell my house and make 100k off it. If I use that 100k toward my new primary house (not investment property) do i still have to pay capital gains tax on the 100k ???
if you have lived in your residence for 2 yr, then you can take $250k ($500k if married) in profit tax-free per IRS code section 121.
an installment sale does not eliinate taxes; it just spread them out over several tax years. Even a 1031 exchnage does not eliminate your tax liability; just delays it indefinately
The IRS will get their share sooner or later ;D
What if I make a profit (50k) on an investment property (I’m not living in but owned for 3 years) and then reinvested that into another investment ? Am I able to avoid capital gains on that deal?
Let’s say I got a guy willing to hold the note for 3 years. He purchased the property for 50k (lived in the house for 10 years) and is selling it to me for 200k (150k profit). I make payments every month for 3 years and at the end of 3 years I pay him the remaining due. He still has to pay capital gains on the $150?
Sorry for the foolish questions, just trying to get things straight
sale of your primary residence it completely different than selling any other pieces of real estate. read the following link
http://www.irs.gov/businesses/small/industries/article/0,,id=98921,00.html
so in your example, NO, the guy who made a $150k and lived the house 10 yrs does not pay any tax.
the only way to defer capital gains on an investment property is do a 1031 tax -deferred exchange. Just “reinvesting” does not cut it.
We recently visited our accountant. We discused this very issue and he assured us, you do not need to live in the house for 2 years to avoid the CGT. He said Bush signed a bill a few years ago reguarding this. If my accountant is wrong about this…I’m firing him. He said it was due to expire in 2006. The only difference was you can avoid CGT if you make under 125K (singel) or 250K (married). Someone PLEASE correct me if I’m wrong.
Big River,
One good source for information on this is the IRS Publication 523.
http://www.irs.gov/publications/p523/ar02.html
To claim the exclusion, you must meet the ownership and use tests. This means that during the 5-year period ending on the date of the sale, you must have:
Owned the home for at least 2 years (the ownership test), and
Lived in the home as your main home for at least 2 years (the use test).
Exception. [i]If you owned and lived in the property as your main home for less than 2 years, you can still claim an exclusion in some cases. The maximum amount you can exclude will be reduced.[/i]
Reduced Maximum Exclusion:
You can claim an exclusion, but the maximum amount of gain you can exclude will be reduced if either of the following is true.
You did not meet the ownership and use tests, but the reason you sold the home was:
A change in place of employment,
Health, or
Unforeseen circumstances (as defined later).
Your exclusion would have been disallowed because of the rule described in More Than One Home Sold During 2-Year Period, later, except that the reason you sold the home was:
A change in place of employment,
Health, or
Unforeseen circumstances (as defined later).
Unforeseen Circumstances
The sale of your main home is because of an unforeseen circumstance if your primary reason for the sale is the occurrence of an event that you could not reasonably have anticipated before buying and occupying your main home. You are not considered to have an unforeseen circumstance if you sold your home after August 12, 2004, and the primary reason you sold it was that you preferred to get a different home or your finances improved.
I’m willing to bet the IRS takes a real close look at folks taking that exclusion which is part of section 121(c) of the tax code since its a grey area in the code. If you use it, you better have pretty good documentation to back it up.
As for BigRiver’s question about income exclusions or phase-outs, there are none in this area (sale of primary residence) to my knowledge. When they changed the law back in '97, this was a real gift to taxpayers. 
BigRiver,
Sounds like you need to look for a new accountant.