I have a four unit property in Baskersfield that I am selling for $585,000. I am willing to participate in an exchange, meaning sell it to a buyer who needs a replacement property. Since my net will be under $250,000, I don~t want;need to buy a replacement property at this time.
Exeter reply:
I just wanted to clarify your comment regarding $250,000. Are you thinking that you will not have to pay taxes because your gain is less than $250,000? The $250,000 exclusion (121 exclusion) only applies to the sale of your primary residence and does not apply to investment property. The sale of investment property will trigger a taxable event if you have a gain.
Should you decide to complete a 1031 exchange, please give us a call. We have an office in Bakersfield and are a national qualified intermediary.
121 Exclusion (Tax Free Exclusion from the Sale of your Primary Residences)
You can also sell or dispose of your primary residence and exclude up to $250,000 in capital gains if you're single (per owner/person), or up to $500,000 in capital gains if you're married and filing a joint income tax return, from your taxable income under Section 121 of the Internal Revenue Code ("121 Exclusion"). The 121 Exclusion is a permanent exclusion from your taxable income (i.e. it's tax free; not tax deferred) and is a tremendous income tax planning strategy that you should seriously consider taking advantage of.
The requirements for a 121 Exclusion are fairly simple. You must have owned, lived in and used the property as your primary residence for at least 24 months out of the last 60 months (2 out of the last 5 years) in order to exclude the capital gain from your taxable income. You can take advantage of the 121 Exclusion once every two years.
In fact, many taxpayers do not — and should — pay close attention to the market value of their primary residence and the corresponding capital gain in order to determine if and/or when they should sell and lock in the tax free benefits of a 121 Exclusion. The amount of capital gain in excess of the $250,000 or $500,000 limitation will generally be taxable, so they should at least consider selling when their capital gain is approaching the tax free exclusion limitation
I bought this property in April 2004 and lived in one of the units until February 28th 2007. I now live in Dallas. My point is that I meet the condition of exclusion 121. I moved out in February 2007 not 2008
How do I market this property to 1031 exchangers who might want a nice property.
I will distribute this information to our 1031 exchange advisors and national branch offices to see if they have any clients interested. You should also copy this post and post it under our Looking for Replacement Property Forum.
Thank you for that I will follow up and post this after I get your next reply to the above additional information about exclusion 121.