Does Capital Gains taxes apply in this case?

rentsmart · February 10, 2006, 2:54pm

Hello,

I just sold my personal residence. With the funds, I plan to buy a 10-15 multi-family apartment unit.

Will I be subject to capital gains taxes if I don’t complete the transaction within 6 months?

reiclub · February 10, 2006, 2:58pm

It depends upon how long you lived in your personal residence. If you lived there for 2 of the past 5 years, you are exempt from $250,000 in capital gains.

rentsmart · February 10, 2006, 3:12pm

I lived in my personal residence for four years. So, does that mean I can take my time placing the money in another property?

I put the $ in my LLC business bank account…but, will they tax it as Income tax??

reiclub · February 10, 2006, 3:21pm

You are home free with the capital gains exemption. You can put the money anywhere you want.

rentsmart · February 10, 2006, 4:39pm

Thank you!

Dave_T · February 11, 2006, 2:53am

The sale of your primary residence is a taxable event, regardless of what you do with the proceeds from the sale.

If you have owned and occupied your home as your primary residence for two of the five years prior to the sale, then the first $250K in sale profit per taxpayer is excluded from capital gains. Any sale profit that exceeds the excluded amount is still taxed as capital gains on your tax return.

There is no requirement to reinvest the proceeds of the sale to qualify for the capital gains exclusion. Reinvesting the proceeds into a new primary residence (or any other investment property) does not defer the capital gains taxes in an otherwise taxable sale.