Discussion:Tax on sale of investment property
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Discussion Forum Index --> Tax Questions --> Tax on sale of investment property
| 17 December 2006 | |
| I owned a townhome in FL where I never lived and sold it in August 2006 for a profit of about $25,000. I haven't bought any other property since. On the capital gains of $25k, I understand that I need to pay taxes. Which IRS form do I need to use or is just Schedule D? Also, if I buy a property in 2007, can I apply the profit from this sale towards this new property and get a tax relief? How soon do I have to buy this new property?
Thanks in advance for your help | |
| 17 December 2006 | |
| If never rented, Sch D and can not apply profit from that sale towards purchase of new property. | |
| 17 December 2006 | |
| Thanks Solomon.
Yes, the unit was never rented. However, I do not understand why I cannot buy another property say for $250K and get away with from paying taxes. I know that there are provisions that allow this, just not sure which ones and in what circumstances and if I must act in a cetain way to be eligible. | |
| 17 December 2006 | |
| You are referring to Sec. 1031. However, once you sell a property and later purchase another this code section will not apply unless this is accomplished via a qualified intermediary. These are called like kind exchanges. If it is an exchange with no boot received, then you just simply defer any gain. | |
| December 17, 2006 | |
| You're welcome! For those who aren't sure what Solomon is referring to, I added a link to Like-Kind Exchange in his reply, above.
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| 17 December 2006 | |
| I think the OP is thinking of the pre-1997 rules for personal residence sales. Those old rules allowed one to defer gain by purchasing a more expensive property within 2 years. That deferral was never available for investment property, only for a personal residence. | |
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