Teardown a rental, build a new one, live in as principle residence--tax consequence?
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Anonymous
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Hello,
We purchased a small house and rented it out for three years. In 2012, the house was torn down and rebuilt, we moved in. We don't really like the neighborhood and want to move out a year or two. There was no appreciation during the rental period, but we will have capital gain when we sale it. Can I use the market value of the new house as the base to calculate capital gain? How do we tell the irs there is no appreciation during the rental years? Is Turbo tax good enough figure this out? Thanks for all helpful suggestion. |
Anonymous
| You will need to pay back any gains during the rental period. You used to avoid it by moving in as a primary but that law was changed a few years a go |
Anonymous
Really? We are planning to move back into an investment property, make it our primary residence and then terdowm and rebuild our other property. You can't do that anymore? |
Anonymous
You can but the gain of taxes will need to be paid when you sell the new home. |
Anonymous
OP- how was the capital gain determined for the rent period? For example, if the house was purchased for $500,000 in 2008, rented for three years. In 2011, the market value of the house was $500,000. The house was teardown and rebuilt in 2011 and occupied as principle residence in January, 2012. The house was assessed by county at $1,000,000 in 2012. The current market value is around $1,200,000. If we sale now, how does IRS want us to pay capital gain? If we live in the house for 5 years are we better off in terms of tax? |
Anonymous
| How about consulting a tax professional?! If you can afford a $1.2 m home, you can afford to pay for a good CPA. |