sale of 2nd home rollover to another

[gizzy]

purcahsed a 2nd home in philadelphia,PA 3 years ago, for 38k. sold it this may for 159k, with the profits from the sale i purchased another home 10 miles away in cherry hill NJ, this property i got a mortgage of 80k for and the rest was paid cash from the sale of the other property.I was told i could rollover this profit , what forms do i need to file and do i need a lawyer to take care of this.
OUTLINE
1.this is a second property, ( in my name for my son )
2.never had a mortgage for the first property
3. 110k profit form sale of property1 reinvested to property 2
4. currently live in a primary residence 40 miles away.

In closing can anyone please help!!!

 

[loku]

Sale of second residence

Unfortunately, I think you may be stuck with paying capital gains on the gain from your sale. There is a provision allowing for nontaxable trades of property, but that provision only applies if the property is held for investment or business. For example, rental property would qualify, but a second home does not.

If this was business or income property, post that fact and I can tell you the other requirements for the tax-free trade.

 

[gizzy]

type of property

The first home my parents purchased in their name by ways of a personal loan( no mortgage ).I did make monthly mayments by way of check to them

 

[loku]

facts

I may have the wrong idea about what happened. As I understand it, you owned two homes at the same time, and you sold the one that was not the main home. Is that the case?

 

[gizzy]

that is correct the 2nd home that was sold for the 110k profit did have rent check receipts. All the money from that sale went into another property.

 

[loku]

More facts

You said you have rent receipts on the second home. Does that mean you rented it out while you owned it?

 

[gizzy]

the home was rented

 

[loku]

Gain on sale of rental property

There is a rule that gain is not recognized on deferred exchanges of investment property. However, I am afraid your gain from the sale must be included in income as gain from the sale of investment property. The reason the sale does not qualify as a deferred exchange is that it was not an exchange of one property for another. It was a sale and subsequent purchase of another property.

The rule is that a deferred exchange is one in which you transfer property you use in business or hold for investment and later you receive like-kind property you will use in business or hold for investment. (The property you receive is re-placement property.) The transaction must be an exchange (that is, property for property) rather than a transfer of property for money used to buy replacement property. If, before you receive the replacement property, you actually or constructively receive money or unlike property in full payment for the property you transfer, the transaction will be treated as a sale rather than a deferred exchange. In that case, you must recognize gain or loss on the transaction, even if you later receive the replacement property. (It would be treated as if you bought it.)

Because you have a large taxable gain, I would suggest you hire a CPA or other tax professional to handle this for you. Since you have rental property, the tax professional may be able to save you some tax dollars in the way you handle the property, and especially if you decide to sell it.