Capital Gains Tax

[Helen Imhof]

Hi,

A year ago we sold our house that we had lived in for 5 years and made about 260K.  We invested some of that on a rental property and built another house.  We want to sell the new house and because we were the general contractors, we saved a lot of money on the process so we can make about 80K profit plus what we spent on the house.

We want to put the house on the market and will be moving to another country to retire, where we will buy a house to live in.  I just don't know about the capital gains tax?  If we wait two years do we still have to pay?  If we sell before that and buy property in another country then does the 1031 rule applies?

[Dave Foster]

@Wayne Brooks

Morning Wayne :)  Look right above you.  Slight twist to what you said though.  If they had lived in the houses they would not qualify for 1031s they would fall under sec 121 like their first sale, live in it 2 out of 5 and the first 500K in gain would be tax free.

I've got several contractor friends whose business model for years has been to build two customs at a time.  They sell one to pay for the expense of building two and for living cash. They move into the other one.  On the first they pay taxes.  On the second they live in for two years while they build their next two houses and then sell and take the first 500K in gain tax free.  A beautiful scenario.  And certainly possible here although it would slow down the overseas repatriation.