Capital Gains / Federal Taxes

[Sky]

What is the name of your state? Washington State (is the state a problem? Just curious it appears that
a lot of responses and posts are from back East. Are the people from all U.S. state or is it mainly NY, Jersey...?)

Hello,

My fiancee and I want to sell our house due to the neighborhood is expected to
depreciate.

We built using a Self Help program. We had built 8 houses in less than a year
and are sad to leave.

The problem: We want out. We have lived there 9 months. The self help company
helped my girlfriend get a loan to buy the land and build a house. The land was
purchased in July 2004, using the loan. Then we built a house after and completed
it in July 2005 with the rest of the loan monies.

Now it's the end of March 2006 and we want out. I hear you have to wait two years
to avoid capital gains and federal taxes, is this true? Does the date start from when
we purchased the land or moved onto the purchased property? Does "sweat equity"
play a game in any of this since the house was an improvement on the land and we
have gained over $60,000 in equity due to building ourselves?

Friends of ours sold their house in under two years and avoided taxes due to putting
a certain percent of "Sweat equity" into the property and raising it's value by a certain
percent before the two year limit. they don't understand why but it worked for them.

We will be buying a house with the monies we profit on this house. Either to purchase
land and build again in the country or to buy a house and property in the country.

Any help or advice would be great.

Thanks,

Sky

[PghREA]

Read this: [url]http://www.irs.gov/pub/irs-pdf/p523.pdf[/url]

Play close attention to the part on Determining Basis. You may need to talk to your tax preparer on what information you will need to establish the basis.

[Sky]

Thanks, this seems to be a difficult question. I found that form last night. I'm printing it out today and going to read it all. I need to anyway. Thank you for replying. I wish there was just a straight up answer but life (and the goverment) isn't always that easy.

again, thanks.