Updated almost 2 years ago on . Most recent reply
Tax question - First Post
Hi, this is my first time posting. I have a tax question. My husband and I got lucky with our first property. We bought a home for $120k with the contingency that the woman who lived there could stay (divorce, but the husband wanted the kids to stay in their home/school). We worked out the rent. All good. Replaced the roof, started doing repairs in the areas we needed to. Then the rent stopped - excuses, excuses. We eventually evicted her and since single families are not in our plan, we renovated and sold for our asking price of $250k 18 months after we purchased the property. My husband did the bulk of the renovations but took no pay for his time during the renovation since we were strapped for cash and figured he'd just take owners draw for his time investment (LLC) after the sale. Accountant (who I'm not sure has much real-estate experience) says he cannot take money out of the sale of the house and because it was a rental that we then renovated and sold, we can not use a 1031 exchange and put the money into a new property. So, here's what I'd like to know...
- does anyone have experience with this type of property (rental that was then flipped and sold in the 18-month-ish time period)
- How do we avoid capitol gains? 1031 exchange?
- how do we recapture the "salary/pay" the sole owner of the llc should have been paid for his labor on the property?