Capital Gains

[EarleH]

What is the name of your state? Mississippi (Texas) My wife and I are currently evacuees from hurricane Katrina. We are both in our late 70s. The question is: We are waiting on a grant from the state of Mississippi for our home of 38 years that was destroyed by hurricane Katrina. We intend on rebuilding and selling. In the mean time we have been looking to buy a home here in Texas. The question is that if we buy here, and then build and sell the home on our property of 38 years, will we have to pay a capital gains tax on the sale of the home in Mississippi. Or are we going to have to wait until the sale of the house in Mississippi prior to buying in Texas?What is the name of your state?

 

[tranquility]

Your question is unfocused. What is happening? You need numbers and specifics. I suspect you will respond and I will need to ask an additional question to clarify. Odds are you won't have a problem, but let's see.

 

[EarleH]

I guess simply, if we buy a permanent home in Texas prior to rebuilding and selling our replacement home in Mississippi , will we be required to pay capital gains taxes on the sale? Earle

 

[tranquility]

Well, if you actually have a "sale", then yes. You will pay capital gains taxes on the profit from your personal residence. If you owned and lived in that personal residence for 2 of the last 5 years, you can exempt $250,000 in profit. ($500,000 if married, filing jointly.)

If the house was taken by the government in a disaster area, you can claim an involuntary conversion and put the money in a new house. What happens if you sold because of a disaster or the timing issues of purchase/sale, I don't know offhand.

So, I ask again, What Happened? How much is the Grant? Why are you rebuilding if you are just going to sell it? Can you use the Grant to build the house with the intention of selling it rather than live there? Again, odds are you will not pay tax, but as the scenario gets more specific, facts need to be laid out in detail before a good answer can be had.