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Real estate tax question

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Junior Member
What is the name of your state? Colorado

I own a home free and clear. Bought it for $215k in 1996. It is now worth $320k. I want to turn it into a rental home but do not want to lose the capital gains exemption on the $115k gain.

Two questions:

1. Is the tax basis at the time I make it a rental the fair market value at that time($320k)? Or do I have to use what it cost me in 1996 ($215k)?

2. Is it legal to sell the home to an LLC that I own and have the LLC own it as the rental? The LLC (with me signing personally for the mortgage) would get a mortgage and pay me the $320k. Then the LLC with me as owner would rent the property. Since a sale took place to the LLC is the exemption on the gain maintained? Is the basis $320k for the home when the LLC takes title?

Thanks for your help. Steve

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