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Updated almost 2 years ago on . Most recent reply
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Help my inlaws save on taxes
Hi all,
My inlaws are considering selling their home that is sitting on 5 acres surrounded by 600+ acres of almond farm that was owned by MIL's father, that she is inheriting along with her 5 siblings. The farm is in the process of being sold, and I'm assuming the step up cost basis will save them considerably in taxes (unless I'm misunderstanding the definition of that rule). Are there any costs/taxes involved in this sale that I'm not considering? I suggested a 1031 exchange if the capital gains turn out to be large enough to trigger an expensive tax bill.
As far as their personal residence, they are due to profit well above the $500k allowance for tax avoidance (not sure of the proper term... it's late lol). Are there any other avenues that might be possible to save them from a big tax bill? They are both on Social Security, if that matters.
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Quote from @Dave Foster:
@Andrew Albritton, maybe rather than sell the home outright they would lease it to the purchaser of the farm with an option for them to purchase it. Once they have used that as investment for a year they could then sell it and still get the primary residence exemption. And they could 1031 exchange the rest of the sale. So they would get part of the gain tax free. And would defer the rest of the gain in the 1031.
So it's possible to rent it out for a period to make it eligible for a 1031 exchange, and still be able to use the primary residence exclusion? They can be used concurrently?