Under section 121, there is an ownership test and a use test, and they don’t have to happen concurrently. For example, you may have rented and lived in a property for 24 months and then bought the property but moved out of and owned it for another 24 months. Your use and your ownership don’t have to be concurrent.
Section 121 applies to your primary residence. Your exclusion amount is $500,000 for married couples filing jointly ($250,000 for individuals) of profit under this provision.
Consider this scenario: you buy a property, live in it for a year, then rent it for three years, and subsequently return and live there for a year. As long as you make less than your exclusion amounts listed above, you won’t have any tax because you lived in the property as your primary residence for 24 months out of the previous five years.
Find the Right Qualified Intermediary for Your Next Like-Kind Exchange
A qualified intermediary can help you defer capital gains taxes with a like-kind exchange. However, it’s important to find the right intermediary for your particular exchange. Not all qualified intermediaries provide the same services or the same quality of services. At CPEC1031, LLC we are well-verse in all types of 1031 exchanges – from forward exchanges to reverse exchanges and everything in between. We have been working with clients on their 1031 exchanges for more than two decades. Give us a call today to discuss the intricate details of your unique 1031 exchange.
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
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