Transfering Cap Gain

[Jimbo435]

Is it possible, and if so, how does one go about it, to build a new house, then sell a current house and transfer the cap gain to the house previously built. Time between completion of construction and close of excrow on existing house could be 6-12 months.

 

[quincy]

What is the name of your state?

 

[Taxing Matters]

Is it possible, and if so, how does one go about it, to build a new house, then sell a current house and transfer the cap gain to the house previously built. Time between completion of construction and close of excrow on existing house could be 6-12 months.

If either the home you sell or the one you buy is your personal residence then it is not possible to do that. But if you have owned and lived in the home you are selling long enough you can get a better tax benefit of excluding from income up to $250,000 ($500,000 if married and filing a joint income tax return) of your gain. See the discussion of that in IRS Publication 523.

If both the old house and the new house are rental/investment properties you may be able to defer the gain from the sale of the old one and have that gain instead carry over to the new place. You'd do that in an exchange that meets the requirements of Internal Revenue Code (IRC) section 1031 which deals with the treatment of the exchange of property that is like kind. These exchanges are thus known as either § 1031 or like kind exchanges. The rules for these exchanges are very exacting and if you screw up on any of the rules the gain will end up taxable to you. For that reason it is a good idea to consult a tax attorney or other tax professional who has experience with these exchanges to assist you in getting it done correctly.

 

[LdiJ]

Is it possible, and if so, how does one go about it, to build a new house, then sell a current house and transfer the cap gain to the house previously built. Time between completion of construction and close of excrow on existing house could be 6-12 months.

I think that you are talking about the old provision that someone had two years from the sale of their primary residence to roll their capital gain into a new primary residence. That law changed more than 20 years ago.

Under the current laws, as TaxingMatters already explained, you can get a 250k (500k if married) capital gains exclusion as long as the property you are selling was your principal residence for at least two of the last 5 years.